Estate planning strategies and the creation of trusts are often used to protect a family’s assets from high tax burdens or other preventable attacks on an estate. The most common way for anyone seeking to control the division of their estate is by drafting a will, which mandates how the estate assets are divided. Some people instead choose to place their money into a trust that may offer additional protection for the assets in an estate. Traditionally, parents planning a bequest to their children or grandchildren might set up a trust themselves for the heirs’ benefit; however, there are alternatives to a benefactor-initiated trust that may work better for your family.
An “inheritor’s trust” is a trust that is set up by the heirs to an estate before the death of a benefactor. Using an inheritor’s trust can further help protect the assets of an estate from creditors, divorcing spouses, and high tax burdens. Unlike traditional trust instruments, which are designed from the top down, an inheritor’s trust is designed to be initiated from the bottom up. This change represents a growing movement for beneficiaries and heirs to an estate to take a more active role in managing the estate while the benefactor is still alive.
Although inheritors need not know the exact amount of their inheritance to create an inheritor’s trust, the trust still must be created with the consent of the benefactor. This could create uncomfortable conversations, as the benefactor must be alive at the time of its creation for the trust to function properly. If properly created, an inheritor trust can protect a family’s assets for generations as the trust continues to function, even as the generations pass. Anyone seeking to leave a legacy for their children or other heirs should research and ask questions about the possibility of an inheritor’s trust to manage and protect their assets most effectively.
The post How to Use an “Inheritor’s Trust” to Protect Your Heirs’ Inheritance appeared first on Boulder Estate Planning Legal Blog.