As a parent, you work hard to provide for your children and ensure they have a bright future. Estate planning is an integral part of this process, and one of your primary concerns may be how to protect your child's inheritance. Fortunately, creating a trust can provide a solution to these concerns and give you peace of mind.
Become Familiar With The Basics Of Legal Trusts
Trusts are flexible estate plans that provide you with the ability to transfer an inheritance to your child. Revocable living trusts are easily among the most flexible and popular options for protecting your child's inheritance. With a revocable trust, you will ultimately remain in complete control of the assets granted to the estate during your lifetime. This means you will have the freedom to change the trust's terms or revoke the trust altogether. This flexibility can be especially beneficial if you are unsure how your child will handle their inheritance.
On the other hand, an irrevocable trust provides greater creditor protection. With an irrevocable trust, you transfer ownership of the assets to the trust, and they cannot be taken back. This can be a good option if you are concerned about future creditors or lawsuits.
Take Steps To Shield Your Child's Inheritances From Creditors
Creditors can be a major threat to your child's inheritance, especially if they incur significant debts or are involved in a lawsuit. However, there are several types of trusts that can provide creditor protection. Using domestic asset protection trusts is one solution that may offer greater protection for the inheritance you want to leave for your children.
When setting up a trust for creditor protection, the timing of the transfer of assets is an important consideration. In some cases, transferring assets to a trust too close to a potential creditor's claim may be considered fraudulent. This could lead to the court ordering it to be reversed.
Plan For Instances Where You Are Incapacitated Or Develop Special Needs
Incapacity planning is another essential consideration when planning your child's inheritance. If your child has special needs or cannot manage their finances, a trust can be used to ensure their inheritance is managed correctly. For example, a special needs trust can provide for a disabled child without affecting their eligibility for government benefits.
When setting up a trust for incapacity planning, it is necessary to consider who will act as the trustee if your child becomes incapacitated. You may appoint a family member or friend, but ensuring they can properly manage the assets is critical. Alternatively, you may appoint a professional trustee.
Contact a trust attorney for more info.