Most people want to leave their family members an inheritance in a way that is the most beneficial for their heirs. This usually means a method that preserves the inheritance and protects it from being wasted or taken away by someone else. Trusts are a great way to do this.
Property that is given to an heir by will or through automatic means, such as a pay on death account or life insurance, is given to the heir or beneficiary outright. As soon as he or she gets it, all of the money can be spent or taken away. It is treated just like any other assets that the heir has. However, when something is left in trust, the assets can be protected. A recent article in the Green Bay Press Gazette, titledin "Inheriting in trust can protect beneficiary," listed some of the things a trust can protect against.
The list includes:
- Bankruptcy - Many trusts do not count as assets during bankruptcy.
- Divorce - Trusts can be structured in a way such that an ex-spouse does not have any right to principle in the trust.
- Lawsuits - Trust assets are normally not subject to legal judgments.
- Bad Decisions - Trusts can be set up to only allow distributions for specific purposes, such as educational and medical expenses.
- Young Age - Trusts can be used to only allow the beneficiary to receive the bulk of the inheritance when he or she is old enough to spend it wisely.
The list is not all-inclusive. The bottom line is that a trust provides far more potential asset protection than an outright inheritance. Depending upon the needs of your family, an estate planning attorney can create a trust for you that protects assets and preserves them for your beneficiaries.
Reference: Green Bay Press Gazette (August 25, 2014) “Inheriting in trust can protect beneficiary"