Many of my clients who set up trusts, leave their assets outright to their children in equal shares when they die. There is certainly nothing wrong with that, but there may be a better way to protect these shares, and their inheritance.
Instead of leaving your assets equally to your children, why not leave it to your children’s trusts, which you can create here and now?
The Inheritance Trust is created by you, today, as grantor, naming your child as trustee and beneficiary when you die.
Why is this needed?
(1) The assets will be protected from their spouse in the event of divorce
(2) The assets will be protected from their creditors in the event of a financial hardship, and
(3) On your child’s death, the unused assets will go to your blood relatives (usually grandchildren) instead of in-laws or others.
These trusts provide that, during your children’s lifetimes, they have complete access to the income and the principal of their trusts — so that you’re not giving them a “gift with strings attached” or “ruling from the grave”. But when your child dies, you would like the unused portion of their inheritance to go to your grandchildren.
The reality of the Inheritance Trust is that it is much easier for your child to keep assets separate from their spouse when these assets are left to them in trust. On your death, all of your assets are retitled directly from your trust to your children’s trusts.
Protecting a family’s lifetime earnings means making sure these assets stay in the family no matter what.
Be Educated! Be Proactive!