Inheritance Planning: Lifetime Trusts
A common inheritance planning question: I received my inheritance outright, why
should I pass my children’s inheritance in lifetime trusts?
It’s a good question; we talk about it with clients each day. It’s great that all went
well with your inheritance, but now the world is a very different place. Some say
that if you haven’t been sued, you haven’t lived long enough. Divorce rates are at
50% for first marriages and 60% for second marriages. Bankruptcy has become
commonplace, and business failure is more common than success.
For all of these reasons, lifetime trusts are a good fit for most estate plans. They
should, at least, be considered. Most clients, when hearing the benefits, choose
to implement lifetime trusts.
First, if an inheritance is given outright, it’s typically gone in 18 months
(same with lottery winnings and any unearned assets.) In trusts, with
proper education and legal protections, they can last a lifetime and be
passed to the next generation.
Second, outright inheritances can be seized by creditors such as a divorcing
spouse, bankruptcy court, business failure creditors, medical crisis, or other
lawsuit such as those stemming from a car accident or malpractice claim. If
assets are in trust, and your beneficiary is NOT the only trustee of his or her
trust, the assets are protected and can’t be taken by creditors.
Third, lifetime trusts provide protections against predators asking for
donations, loans, or investments. Your beneficiary has an “out” by simply
stating, “It’s all tied up in trust.”
Fourth, lifetime trusts can include special needs planning so if a beneficiary
is, at any time, receiving governmental assistance, his or her inheritance
won’t disqualify him and be wasted. For example, a grandchild may be
born with autism or another disability and qualify for government
assistance. A lifetime trust would guarantee the child would still get his or
her inheritance and still qualify for government assistance.
When you are planning your estate or updating your current plan, seriously
consider lifetime trusts. If you have any questions about inheritance planning,
consult with a qualified estate planning attorney.
Experienced estate planning attorneys Fayetteville AR of the Deborah Sexton Law
Office PA offers estate planning and business planning resources to residents of
Fayetteville AR. To learn more about these free resources, please visit