Understanding the Facts about an Inheritance Trust

Inheritances can be messy, but with an inheritance trust, you can rest assured that your assets
will remain in the family upon your death. Learn more here.

Inheritance Trust

Most people who create a revocable or irrevocable trust leave their assets outright to their children and grandchildren after their death through a will.

While that’s a fair option, a trust document may be a better route. It offers more financial protection for both you and your beneficiaries, who are often children, grandchildren, and other family members.

A will would leave your financial assets equally distributed among your children after you die, but it could lose its value if your children are sued. However, you can create a living trust here and now while developing your estate plan.

It also avoids the issue of parents not specifying where their personal assets should go or who should control them after they pass.

Benefits of Leaving Trust Assets in an Inheritance Trust

A trust like this can benefit you in many ways during your lifetime, such as setting forth how your trustee must distribute your assets, avoiding federal estate tax, and minimizing your income taxes in a fully legal way. It will also help greatly with your estate planning as a whole.

Some of the other main benefits to leaving your assets in this type of trust include:

  • Protection From In-Laws: If you are concerned that your child’s spouse may try to take the money if they separate or divorce, this will keep the money protected, and distributions will only go to the beneficiaries that you specifically elect.
  • Protection From Financial Hardship: Keeping the money in the trust will protect them from creditors in the event of financial hardship. Creditors cannot access the money.
  • Preservation of Unused Assets for Posterity: Should there be leftover money after your beneficiary’s lifetime, this legal document would ensure any assets will go on to the next generation of blood relatives such as grandchildren rather than going to a spouse or in-law.

It also works in favor of your trustees and beneficiary or beneficiaries. In your children’s lifetimes, they will have total access to both the income and the principal amount of the assets in the trust. However, when they die, it also ensures any wealth that has not been used will then pass on to their children and so forth.

How Does a Trust Inheritance Work?

It’s important to understand that a trust is different than an inheritance. Trusts delegate assets to a trustee for a period of time, while inheritance means that the beneficiaries will own those assets after the trust creator passes on. The trustee protects the inheritance until after the person’s death, while beneficiaries simply receive an inheritance.

You also have the ability to become a trustee, while you cannot become a trustee with an inheritance.

If your grandchildren are not yet the age of 30 when inheriting the trust, the funds will be held for them until that time. They will be administered with an estate planning lawyer by the successor trustee, which would typically be your child or may be appointed by the court. Or, they may make distributions for items such as education or a new home, for example.

Once they reach the age of 30, they will receive their distributions from any trusts they are a part of. Then, they are generally free to work with a fiduciary partner to manage their personal finances.

Until then, however, the trustee will use the assets they need for:

  • Health
  • Education
  • Support
  • Maintenance

The trustee also has a legal obligation to honor the terms you’ve set forth, which makes it easier to explain to a spouse when the issue of whether they gain benefit from the trusts or not.

If you want to learn more about the process of establishing trusts for your beneficiary as a part of your estate plan, contact an attorney you can trust by calling Legacy Law Group.

Inheritance Trust Funds

 
Inheritance funds are any amount of money you pay into your beneficiary’s trust to inherit after you pass. These trust assets could come from earned income, savings, or even trusts that you were a beneficiary of at one point.

You have a few options for paying an adult beneficiary their inheritance:

  • You can use a trust company to serve as a corporate trustee, or you can designate one of your children as the trustee.
  • You can leave your assets in a regular or discretionary trust, which leaves the distribution of assets up to the discretion of the trustee themself and may help.
  • You can leave the assets available to them in a removable trust or an irrevocable trust.
  • You can make it to inherit their legal access in stages or all at once.

 

Avoiding Federal Estate Tax

 
Regardless of how you set up your distribution or access, getting a trust established will offer you estate tax protection and make the estate planning process much easier. While your beneficiaries will need to pay expenses to manage the trust, it is well worth it.

If the estate were subject to estate taxes, the estate taxes would be paid before the inheritance from a trust reaches the beneficiaries, so they won’t have to worry about paying.

To learn more about federal estate taxes, contact an attorney from our office.

Leaving Inheritance In Trust

 
Leaving inheritance in a trust to your beneficiaries is a great way to offer protection for your property using a trust rather than a will. When the beneficiary inherits the trust, they don’t have to do anything to protect the assets and keep them in the family. Here’s why:

  • Your child will be the primary beneficiary. This beneficiary will also serve as the trustee of the trust until other beneficiaries reach the required age.
  • The trust then becomes your primary beneficiary. Upon the death of both you and your spouse, the funds will flow to your beneficiaries.
  • Your children, as the trustees, will have full access to the inheritance that you’ve established in their lifetime. This will be according to any provisions you’ve set forth, and it will only be theirs. For example, if they divorce, any person previously married to them will not gain the estate tax benefits or access to the funds.

Inheritance Trust Fund Estate Planning

 
During the estate planning process, your financial advisor will help you set it up to place as much property as you want in the trust, which gains the additional benefits of avoiding estate tax.

They will then walk you through the beneficiary naming process and select a trustee to hold and manage the money until they are of the desired age.

If you want to give the right people access to control over your finances through trusts they inherit after you pass away, you should consider putting your inheritance in a trust. Contact our office to learn more.

Inheritance From A Trust

 
When a beneficiary reaches the age to inherit their distributions outright from the trust, the primary trustee will ensure each beneficiary’s inheritance is distributed correctly. You may set it up, so the outright distributions come in stages or all at once, depending on your preference.

Inheriting a trust means many things, but it offers benefits to the protected money that is not otherwise available to someone who inherits a great deal of money through a will.

If you are ready to set up a proper trust for your children’s and grandchildren’s inheritance, contact Legacy Law Group to get in touch to request a consultation.

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“Matthew Meuli, Attorney/Counselor has been a friend of mine and Linda’s for the past four years. Matt and I met through Business Network International. At BNI Matt presented himself as a very qualified counselor for planning a trust. I had been a beneficiary of my mother’s trust and learned the value of a will versus a trust. We were able to set up the L&L Trust in an easy and understandable way with Matt’s professional help. As we have seen in the last two months life can change in a moment and having a trust in place gives us tremendous security.”

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“When my father passed unexpectedly, it was surprising how much was involved. We had no idea what to do, where to go, how to find info that wasn’t written on his 1 page handwritten will. We will be forever grateful that we had Matt Meuli by our side showing us how to navigate through my father’s poorly prepared will. We have since set up a trust for our little ones and have no worries for those left behind. Matt thoroughly explained each part of the process in an easy to understand way. We now have peace of mind. Thank you Matt!”