When you are exploring your options for passing on your estate to your beneficiaries – including your spouse, children, or other beneficiaries – one option that you may want to consider is creating a discretionary lifetime trust for each beneficiary. These offer a level of asset protection for your beneficiaries, and also a legal barrier that bars creditors, and even divorcing spouses, from taking away what you wanted your beneficiaries to inherit.
Using Lifetime Trusts for Minors
When beneficiaries are minors, a trust is required to keep the beneficiary’s inheritance until they reach a specific age. Most of the time, parents will pick an age that ranges from 20 to 30 years – when they feel that their beneficiary is mature enough to invest or manage their own inheritance funds. When the beneficiary reaches the specified age and the trust is distributed, the property becomes the beneficiary’s property; therefore, it is subject to creditor claims and divorcing spouses directly associated with the beneficiary.
To protect minors from such actions, you could create a discretionary lifetime trust. This will allow the trust to continue during their lifetime. When drafted properly, it creates a layer of asset protection for the beneficiary – so that, even if they are sued or file for divorce in the future, their inheritance is not affected.
Using Lifetime Trusts for Adults
Discretionary lifetime trusts benefit adults just as much as minors. You could set one up for a beneficiary of any age, including your own spouse. The same reasons for a minor lifetime trust apply for an adult one: To protect their assets.
Also, if the adult beneficiary is already known to mismanage money, you can create a trust and still give him or her an inheritance without worrying about how or what he or she will spend it on, because a lifetime trust will protect the beneficiary from outside influences, and his or her own bad decisions – as well as excessive spending habits.
Three Key Benefits
To sum it up, there are three key benefits to creating a discretionary lifetime trust:
- The beneficiary never receives an outright distribution or lump sum payment from his or her inheritance. Instead, the money is kept in a trust to ensure that he or she cannot spend it all at once. He or she is then given smaller, more manageable distributions.
- Beneficiaries of the trust receive distributions for health, educational purposes, maintenance, and support. The trustee will have discretion over the distributions made to the beneficiaries.
- If the beneficiary is sued, has creditor judgments, or gets divorced, the lifetime trust is inaccessible.
Protect Your Beneficiaries – Create a Lifetime Trust
If you want to protect your beneficiaries and ensure that they can enjoy their inheritance for the rest of their lives, contact the Law Office of Andrew M. Lamkin, P.C. today. We can help you explore options for trusts, including special trusts for adult beneficiaries, as well as trusts for minor children. To get started, schedule your free consultation at 516-605-0625 or fill out our online contact form with your questions.