While you may have some pride knowing that you’ve accumulated valuable assets to pass on to your family, there’s also some trepidation in having to deal with your own mortality and losing control of the wealth you worked so hard to create.
WTOP’s article simply poses the question: How do you ensure that your wealth gets distributed to the right people in accordance with your intentions? The article, “How to protect inheritances for future generations,” first suggests that you sit down with your children and talk about your estate planning. Discussing any inheritance can be difficult for the donor, as well as the recipient-beneficiary. This may be the first time you’re telling your kids as adults about your net worth. This can be a lot of new information to process.
Rather than transferring assets directly to children, parents can create a trust to transfer wealth to their kids and get some protection for these assets. Depending on the state and circumstances, trust assets may be more at risk when a beneficiary is the sole trustee and has broad discretionary powers to distribute assets to anyone, including to themselves.
You can add provisions that help restrict the beneficiary’s control over the trust assets to help safeguard a trust as being deemed separate property, such as in a divorce. You can add an independent co-trustee to the trust and give them total authority to withhold or make distributions to the beneficiary at his or her sole discretion. You can also add protection by these methods:
- Adding multiple beneficiaries, instead of only one primary beneficiary;
- Requiring that the “distribution” trustee be a corporate or professional trustee;
- Making certain that the beneficiary doesn’t have general power of attorney to direct trust assets; and
- Creating a trust that lasts for multiple generations, rather than outright age-based distributions.
Trusts are complex, so consult with an experienced estate-planning attorney to make sure that your children understand the trust terms and the importance of maintaining the assets under the trust’s ownership.
Reference: WTOP (April 19, 2017) “How to protect inheritances for future generations”
For assistance in setting up or modifying and existing trust for your family, give our office a call at 801-438-7120 for a free consultation.