Can a Trust Protect the Inheritance of My Children?

Trusts protect inheritances
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Creating a trust can provide estate planning protections for your children.

Your children are adults in the eyes of the world.

Even so, your adult children will always be your babies.

As such, you still want to protect them.

Some children grow up and other children just keep having more birthdays.

According to a recent Kiplinger article titled “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer,” there are many things you cannot control when your children become adults.

A trust can protect adult children from poor decisions.
Your children may require protections afforded by a trust.

For example, they must make their own choices on a career, a spouse, and how they live their lives.

Although you may have confidence in how you rear your child, you may not be able to have the same confidence in their spouse or business partner.

This makes a trust particularly useful in an estate plan.

While trusts are often used to minimize estate tax liability, the current high federal estate tax threshold means few Americans use a trust for this purpose.

This trend, or course, may change under the new federal administration.

For those who have concerns about what will happen to assets or heirlooms when their children inherit, a trust can grant peace of mind.

If you have minor children, you can provide instructions on how the assets are to be used for their benefit because minors cannot inherit property outright.

It also can provide incentives for distributions or outline directions to protect your children from squandering their inheritances when they come of age to inherit.

Another concern for parents is the people their children choose to marry.

Although the happy couple may appear perfectly at peace as newlyweds, problems may arise in their marriage.

Your child may find his or her spouse is a spendthrift or has a hidden addiction or leads a double life.

Such marital issues can place the inheritance for your child at risk.

A trust can keep the assets from being accessed by the spouse to fuel his or her bad habits or worse.

Another way your children could lose their inheritance is through a divorce.

With a trust you can keep assets out of the divorce settlement.

This protects the inheritance not only for your children but also for their own children.

Unfortunately, many people learn the value of using a trust in their estate plan the hard way – they fail to create a trust.

Work with an experienced estate planning attorney to determine if a trust is suitable for your goals.

Be sure to review and update your plan every two years (my rule of thumb) as your circumstances change.

Reference: Kiplinger (April 16, 2021) “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer”

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