By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho
Do you want to reduce your child’s taxes on their inheritance and at the same time protect that inheritance from predators?
There are ways to write up your estate plan, so after your death, the inheritance received by your children is:
- Protected from a potential loss due to a divorcing spouse, creditors, lawsuits and bankruptcy: and
- Minimizes your child’s income, estate and death taxes associated with their inheritance.
One way to protect an inheritance received by your children is to create an irrevocable “Heirloom Trust.” This trust may allow your child to manage the funds during that child’s lifetime, if that is what you want. You can arrange for the Trust income to be paid at a lower income tax rate on any taxable earnings. There are other tax advantages, but most importantly, the funds in this trust will be protected from: A spouse who is divorcing your child, your child’s creditors, lawsuits and even bankruptcy.
For this planning technique to work, you, the parent, must establish this powerful part of your estate plan now and coordinate your other planning documents with the Heirloom Trust to maximize the protection for your child when you die.
Now, and in the foreseeable future, economic times are difficult. If one of the goals for your estate plan is to protect your children and grandchildren, consider a “Heirloom Trust.”
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