(a.k.a. “Heritage Trusts”)
One of the greatest gifts a parent can give to a child is an asset-protected inheritance trust. When assets are given outright to a child, those assets are immediately exposed to “creditors and predators.” In too many cases, inheritances are quickly stripped from a beneficiary. The most common scenarios that eliminate inheritances are:
- Divorce – A former spouse claims a right to half the inheritance.
- Special Needs & Governmental Assistance – Age or illness qualify a beneficiary for governmental aid but not until an inheritance is exhausted.
- Creditors – A beneficiary falls into debt and creditors claim the inheritance.
- Bankruptcy – Because of unforeseen circumstances, a beneficiary must file for bankruptcy and loses the entire inheritance in the process.
- Lawsuit – A beneficiary becomes personally or professionally liable for an accident and the inheritance becomes accessible to the one suing.
- Liability as guarantor of another – A beneficiary cosigns or in some way becomes co-liable for the debts of another and thus exposes the inheritance.
More and more, it is becoming almost certain that beneficiaries will experience at least one of these scenarios in their lifetime, putting their inheritance at potential risk of being completely lost.
Further, a beneficiary cannot place assets in his or her own inheritance-protected trust; rather, inheritance protection can be created only by the benefactor. When the giver of the inheritance dictates the terms of the trust, no power can strip it from the beneficiary.
Typically, asset-protection inheritance trusts are fairly simple to maintain. The beneficiary should keep the assets titled in the name of the trust, whether real or personal property. For example, if a home is titled directly in the name of the beneficiary instead of the trust, the asset remains outside the trust and is exposed to creditors and predators. Similarly, if a bank or investment account is titled in one’s personal name, it is exposed. The key is that the beneficiary keep the assets titled in the trust until actually spent.
More and more people are using the legal system to deprive others of their life’s work. Over 19 million new lawsuits are filed in the United States every year, many of which are frivolous or settled for sums greater than the actual liability. Also, more than half of marriages now end in divorce, wreaking not only emotional but financial havoc. An Inheritance Protection Trust can shield one’s wealth from the devastating consequences of these all-too common events.