Some people are not good with money, and others run into financial problems that they really didn’t cause on their own. This can be something that crosses your mind when you are engaged in your inheritance planning efforts.
Clearly, if you were to leave a direct inheritance to a loved one through the terms of a last will, the assets would be in the direct personal possession of the inheritor. They would be treated like any property, and the inherited assets would be available to creditors seeking redress. The tax man could also seek to attach the assets if a tax lien was issued.
There are those who are under the assumption that you surrender direct personal possession of property that you convey into any type of trust. This is true when it comes to irrevocable trusts, but there are also revocable trusts.
Revocable living trusts are very widely utilized these days, and they can provide benefits for families of relatively ordinary means. People who are concerned about losing control of assets that they convey into a trust often find living trusts to be appealing, because you do not lose control of the assets.
With a living trust, you have the power of revocation, so you can dissolve the trust and take back the assets. Plus, throughout your life you can serve as the trustee, and you can act as the beneficiary as well at first.
In the trust declaration, you name a successor trustee to take over after you are gone, and you name heirs to act as successor beneficiaries. A lien could be placed against a beneficiary’s interest in the trust. The assets would not be protected.
There are irrevocable spendthrift trusts that can be used to protect assets that you want to leave to a loved one that you have concerns about. If you take this route, you name an independent trustee to manage the assets in the trust. The beneficiary would not have the control.
Many people will utilize the services of a corporate trustee like a trust company. Many banks also offer trust administration services.
Assets that are contained within the irrevocable spendthrift trust would not be subject to creditor liens, so they would be protected.
When you are engaged in your inheritance planning efforts, you should educate yourself comprehensively so that you understand the intricacies. There are many different strategies that can be implemented, so you have the opportunity to provide for each person that you love in the ideal manner.
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Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.