Parents often come to Axis Estate Planning with concerns about safeguarding their children’s inheritances. From worries about job instability and the impact of a potential divorce to questions about whether their children can responsibly manage a substantial sum, these are all valid concerns. Fortunately, there are strategic ways to protect your children’s inheritances from these and other potential risks.
Trusts: A Strategic Solution for Protection
Trusts are an essential tool for protecting inheritances, offering benefits beyond avoiding probate and reducing taxes. They can be structured to shield your children’s assets from various threats, including creditors and poor financial decisions. Here are a few types of trusts that can provide this protection:
Discretionary Trusts
A discretionary trust gives the trustee full authority to decide when and how to distribute the trust’s assets. This flexibility is ideal for protecting the inheritance if your child faces financial difficulties, such as bankruptcy or a divorce. Because the trustee can withhold distributions, creditors cannot access the assets, making this an effective way to safeguard the inheritance.
Support Trusts
Support trusts mandate that the trustee provides for specific needs such as health, education, and living expenses. This ensures your child’s basic needs are met while also protecting the assets from most creditors. However, certain “super creditors,” such as those seeking child support or alimony, may still have access to these funds. This trust type offers a good balance between support and asset protection.
Spendthrift Trusts
With a spendthrift trust, the beneficiary is restricted from transferring their interest in the trust. This prevents the assets from being reached by creditors or from being mismanaged by the beneficiary. If you’re concerned about your child’s ability to handle money or external influences on their financial decisions, this trust type provides strong protections.
Crafting the Right Plan for Your Family
At Axis Estate Planning, we specialize in creating customized estate plans that protect your family’s financial legacy. If you’re worried about safeguarding your children’s inheritance, contact us today at (248) 920-9398 to discuss your options and ensure your estate plan provides the security and peace of mind you deserve.
