One of the key decisions in preparing your estate plan is deciding in what manner you will leave your assets to your beneficiaries. Years ago it was quite common to leave inheritances outright. In more recent times, “staggered” distributions were favored, which distributed the inheritance to the beneficiary in pieces – such as one-half at death and the balance five years later, or one-third when the beneficiary attained ages twenty-five, thirty and thirty-five.
With the recent proliferation of lawsuits, and the divorce rate at about fifty percent, these types of distribution plans are becoming less common. More and more often, parents are leaving inheritances in trust for their children and grandchildren. The advantages of leaving an inheritance in trust are many:
- Lawsuit protection, if the trust is properly structured;
- Protection from a divorcing spouse of the beneficiary;
- A potential reduction in estate and generation-skipping transfer taxes at your death as well as at the death of future generations through the use of generation-skipping trust provisions;
- In the case of a “spendthrift” beneficiary, or one who is prone to drug, alcohol, or gambling additions, the ability to have a third party manage the inheritance for the beneficiary;
- In the case of a “special needs” beneficiary, the ability to avoid disqualifying the special needs beneficiary from receiving valuable government benefits such as Medicaid or SSI while, at the same time, making inheritance funds available for their supplemental needs.
Setting up an estate plan requires much forethought and careful planning. A qualified estate planning attorney can assist you in working through the various options of creating a comprehensive estate plan that addresses your wishes and concerns.
- Can a Beneficiary Be the Trustee of an Irrevocable Life Insurance Trust? - May 9, 2023
- What is a Letter of Instruction? - November 15, 2022
- Power of Attorney Basics - October 7, 2022
