If you think you only need to create protective trusts for young, troubled, or financially inexperienced beneficiaries, then think again. In today’s environment of frivolous lawsuits and high divorce rates, you should consider protective trusts for all of your beneficiaries, minors and adults alike.
What is a Protective Trust?
A protective trust is a type of irrevocable trust that you can fund after you die. Your assets will be transferred from your revocable trust into the trust shares for the benefit of your beneficiaries after death.
The trust is discretionary because you dictate when the trustee can distribute assets for the benefit of the beneficiaries. For example, you can permit the trustee to use trust funds to pay for education expenses, health care costs, a wedding, buying a home, or starting a business.
How Does a Lifetime Discretionary Trust Protect an Inheritance?
With a protective trust, each of your beneficiaries will have a fighting chance against lawsuits and divorcing spouses because their inheritance will be held in their trust. The assets will be away from their own personal assets and out of their control. Creating this type of protective “box” around the inherited property means the inheritance is not the beneficiary’s property to do with as they please. Instead, only the trustee can reach inside the box and pull funds out for the benefit of the beneficiary. Creditors, predators, and divorcing spouses are generally blocked from reaching inside the box and taking property out.
When the beneficiary passes away, what is left inside their box will pass to the beneficiaries you choose. You could decide, for example, to have the assets pass to your grandchildren inside their own separate boxes and on down the line. This can create a cascading series of protective trusts that will protect the inherited property and keep it in your family for decades to come.
What Should You Do?
Does all of this sound too good to be true? It’s not. Our firm is available to discuss how you can incorporate lifetime discretionary trusts into your estate plan. Your family will certainly be glad you did. Give us a call today at 419-872-7670.
If you’d like more information about what goes into an effective estate plan for you, you can download our free Estate Planning Checklist. https://chamberlain-law.net/free-estate-planning-checklist/