Margaret and Al have been frugal all their lives and made a habit of putting money aside every paycheck. Now they are in their seventies and plan to leave everything they have to their son Lee, when they both die. They have not told Lee, but they never liked his wife. The Barkleys want to make certain that Sally does not end up with Lee’s inheritance
Margaret and Al have another worry–their grandson, Pete. Pete is 17, spends all his free time fishing in the Boise River and rather than study, he is with his girlfriend. His grades are so bad that he may not graduate from high school. His grandparents are concerned that unless Pete changes his ways, he will not be able to support himself.
What to do? Margaret and Al talked to their estate-planning attorney and shared their concerns about Lee, Sally and the grandchildren. They were honest in sharing their worries. For certain they did not want to give everything to Lee, and have it go to Sally when he dies because, if she remarried, Sally’s second husband would end up with everything. They want all their assets to pass to Lee and somehow be protected from Sally inheriting the balance. In addition, they want to help and protect their grandchildren. Their attorney suggests one planning method to accomplish their goals is to create an “Inheritance Trust.”
How does an “Inheritance Trust” work? Margaret and Al create the Inheritance Trust now, and they name the Trust as the recipient of their estate when they both die. Lee manages the Trust and also has the use of the estate assets deposited in the Trust. A big difference is when Lee dies the assets in the Trust go to his children, not his spouse. In addition, the funds in the trust can be used to help provide an education for the grandchildren. Pete can get the help he needs to be self-supporting, but he will not be able to freely waste the money in the Trust.
There are a number of additional benefits to leaving assets in Trust to Lee. These include:
- The assets will be protected from his spouse in the event of divorce,
- The assets will be protected from Lee’s creditors in the event of a financial hardship,
- On Lee’s death, the unused assets will go to his blood relatives (grandchildren) instead of in laws, and
- These assets are protected from lawsuits. If the grandchildren are under age 30, the funds are held in Trust for them until 30, but the funds can be available to the grandchildren to help them get started in life.
If you want to protect your children’s inheritances from divorce, lawsuits, creditors and bankruptcy, call and set up an appointment with me to see how this planning technique fits for your estate plan.
