If you have long set aside resources so that you will leave a noteworthy inheritance for your children, you obviously want them to receive as much of those assets as possible. Unfortunately, many life circumstances could put their inheritance at risk, especially if you bequeath your property to your children using a basic last will and testament.
Property inherited directly becomes the possession of the beneficiary. That could cause numerous issues. Someone could squander their entire inheritance in a matter of weeks. They could lose a significant amount of it in a divorce to their spouse, even if you didn’t name their spouse as a beneficiary. A civil lawsuit due to your child causing a car crash or failing to pay a debt could also put their inheritance at risk.
You can prevent all of those issues by using a trust to pass your assets to your children.
A trust limits access to the asset
Many people think of estate trusts as a tool for wealthy parents with spoiled children. However, trusts are a practical tool for families in many situations.
One of the biggest benefits of a trust is that you get to put rules or restrictions in place regarding how much people can withdraw at once or even what they can use those resources for. A trust could prevent a child with a history of overspending or doing drugs from receiving cash resources that they will spend on their worst habits.
The trustee can also help validate that beneficiaries use trust resources in accordance with your wishes.
A trust maintains ownership of those assets
Using a trust in your estate plan will prevent inherited assets from becoming the property of your beneficiaries. In other words, your child doesn’t own the trust assets but rather has access to them.
If they get divorced, there won’t be a risk of them commingling their inheritance and leaving it vulnerable the claims by their spouse. Having the assets held by a trust will also ensure that creditors can’t come after those assets. The trust will also reduce the risk of estate taxes diminishing what your loved ones inherit.
Adding a trust to your estate plan can help you maintain control over your legacy and properly protect your children from the potential risks of a large inheritance.