Protecting Your Beneficiaries With Continuing Trusts
Many of our clients’ concerns over protecting their assets from their beneficiaries' mistakes, creditors and divorcing spouses lead them to leave their assets in trust. The benefits of continuing trusts are numerous and they can be designed to meet the specific needs of each beneficiary.
Inheriting in Trust is a Blessing, Not a BurdenMany of our clients initially think of trusts as an unnecessary burden on their loved ones. They think that leaving property in trust for their children indicates a lack of trust. Nothing could be further from the truth. Leaving an outright inheritance to a child or other beneficiary can have disastrous consequences. Both the type of problems and the likelihood of those problems occurring will depend on specific circumstances. We design trusts with varying levels of protection and access, depending on those facts.
Leaving Trusts for Minors Avoids Guardianship and Protects Teenagers From Making Bad DecisionsMoney left to a minor child in North Carolina will require a custodian or guardianship until the child is 18 years old. The process of securing a court-appointed guardian is often costly and time-consuming. The fees associated with the guardianship will likely be taken out of your estate, which will reduce the inheritance for your beneficiaries. Additionally, the court-appointed guardian may not be the person whom you would choose. Most importantly, the Court will not provide protection after your beneficiary's 18th birthday. At the age of 18, your beneficiary will receive full, unrestricted access to the funds. Teenagers generally do not have the maturity or financial acumen to handle significant sums of money. You can prevent all of these issues by creating trusts for your beneficiaries.
Trusts for Adult Beneficiaries Can Be Designed to Balance Access and ProtectionOne type of trust that we create gives the beneficiary complete access to the funds held in trust. This type of trust offers little creditor protection, but does provide divorce and remarriage protection, and can prevent the accidental disinheritance of your grandchildren. We can also structure trusts such that the trust assets are not subject to attachment by the beneficiary's creditors. Some beneficiaries also need protection from bad decisions. For inexperienced beneficiaries, having a co-trustee in place for a period of time can help them develop the knowledge and maturity to handle their assets properly. We often create trusts that allow the beneficiary to serve as co-trustee for several years before becoming sole trustee. For beneficiaries who have bad habits or problems with self-control, it is sometimes appropriate to give the decision-making authority to someone else. You have a great deal of flexibility in designing trusts for your beneficiaries.
Supplemental Needs Trusts are Imperative for Beneficiaries on Needs-Based Government AssistanceIf you have a special needs beneficiary who is receiving needs-based government assistance, such as SSI or Medicaid, leaving assets outright to that child may cause the loss of those benefits. That would be a waste of your assets, and could leave your child without the financial resources necessary to live the same kind of lifestyle you have been able to provide. Unfortunately, this leads some parents to disinherit a child. This leaves your child in the same position. Medicaid and SSI will pay for only a very minimal standard of living. A cheap, dangerous and common way to handle this problem is to leave assets to another child along with unofficial instructions to "take care of" your special needs child. This may work on a short-term basis. But it is a risky long-term plan. A much better option is for you to set up a Special Needs Trust for your child. This trust lets you leave your special needs child an inheritance without jeopardizing his or her eligibility for benefits.