How can a Trust Protect my Beneficiaries?
When you leave assets outright to a beneficiary—which is often the default method of distribution in most estate plans—those assets are given directly to the beneficiary. While this can be very convenient and easy, such a method of distribution could create serious vulnerabilities, particularly during difficult life events like lawsuits or divorce.
A revocable trust allows you to leave assets in a sub-trust, which provides an extra layer of protection. The trustee of the sub-trust has legal title to the property and manages the money for the benefit of the beneficiary; which could offer a layer of protection for the beneficiary.
Frequently Asked Questions (FAQs)
How can I Keep Inheritances Safe During Times of Crisis
When assets are held in a sub-trust, the beneficiary does not technically “own” the trust assets—they simply have a right to benefit from them through what is referred to as equitable title. Because of this structure, creditors and former spouses may have a harder time accessing those funds, provided the trust instrument is structured properly..
This can make a meaningful difference if a beneficiary is:
Going through a divorce;
Facing legal claims or bankruptcy; or
Struggling with addiction or poor financial judgment.
Can a Sub-Trust Enable Flexible Distributions?
Trusts can be drafted to allow distributions to occur at a set age, life event, or at the trustee’s sole discretion. This allows you to provide for the beneficiary without giving them direct ownership or control over their inheritance. This may preserve the protective barrier between the beneficiary and outside claims.
How do I Draft a Revocable Trust?
You’ve worked hard to build your legacy. A revocable trust can help ensure that legacy is preserved—even in the face of unexpected life events. Retain an attorney to draft the trust, explain how it functions, and explain the process of funding the trust.
Want to Protect Your Beneficiaries?
Let’s discuss how trust planning can help you preserve, protect, and pass down what you have worked your entire life to earn. Contact us today to schedule your free initial consultation.
Please note: The following is for informational purposes only and does not constitute legal advice. We strongly recommend consulting an experienced estate planning attorney before making any decisions related to your estate plan.