One reason that is often given for not leaving inheritances in trust is that the parent wants the child or other beneficiary to be able to use the inheritance to buy a house, start a business, or invest for retirement. This is a common misunderstanding. Just because an inheritance is left in trust for a beneficiary does not prevent the inheritance from being used for these purposes.
Your Trustee of the beneficiary’s trust can invest in these types of assets – the only difference is that the title to the asset, such as the house, business, or retirement savings, will be in the name of the beneficiary’s trust as opposed to the name of the individual beneficiary.
Although this difference in how title is held seems small, it can make a big difference in the event the beneficiary’s spouse files for divorce – or the beneficiary is sued for an auto accident or for malpractice in his or her profession – or is otherwise being pursued by creditors. It can be the difference between losing the house, business or retirement assets – or being able to continue to use those assets and passing them on the beneficiary’s heirs upon his or her death.
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