Is there anything you can do to prevent your adult child’s spouse from taking half of your child’s inheritance through a divorce after your death? The answer to that question is yes. Scheduling a consultation with a Cape Cod estate planning attorney is the first step you should take.
Many people who have prepared a will or established a trust in Massachusetts simply leave their assets directly to their children, but that may not be the wisest strategy. If a beneficiary receives 100 percent of his or her inheritance directly and at once, the inheritance has no protection.
Massachusetts estate planning attorneys have seen all of the ways that an inheritance may be lost. The right attorney will offer you experience, guidance, and helpful insights. Keep reading to learn about the most effective ways to protect the assets that your children will inherit.
What Can Happen When Your Child Receives His or Her Inheritance?
Creditors have the right to take legal action to collect what they are owed. If your child has filed a pending bankruptcy petition when he or she receives the inheritance, creditors must be notified of the inheritance, and they can take what they are owed.
If your adult child is married when he or she receives the inheritance, and if the inheritance funds become commingled with the spouse’s assets, it is conceivable that your child’s spouse, with a sharp divorce lawyer, could take half of that inheritance in a divorce proceeding.
If your child receives government benefits and abruptly inherits your assets, the inheritance may disqualify your child for further benefits. And if your child is dealing with personal issues such as abuse or addiction, passing your wealth directly to that child simply may not be a wise idea.
What Can You Do – Now – to Protect Your Child’s Inheritance?
How can you protect your child’s inheritance from creditors, divorce, and a number of other risks? You will be able to protect those assets by setting up a Personal Asset Trust℠ with the advice and guidance of a Cape Cod estate planning lawyer.
A Personal Asset Trust℠ gives you control – even after your death – over the assets that your beneficiaries will inherit. You can stipulate in the trust particular conditions that will protect your assets so that your children do not lose the wealth that you intend for them to inherit.
A Personal Asset Trust℠ may be created as a part of your revocable living trust. It is literally a “trust within a trust.” It protects your assets and lets you control the transfer of assets so that your estate will pass to your grandchildren – and not to in-laws or people who are strangers to you.
How Does a Personal Asset Trust℠ Work?
Rather than transferring your assets directly to your beneficiaries, when you have set up a Personal Asset Trust℠, you move the assets that your beneficiaries will be inheriting into the Personal Asset Trust℠.
The trust, not the beneficiary, owns the assets, so no benefits are lost, and the assets are protected from divorce, judgments, and debt collection. Generally, the child/heir will be named the Trustee, so he/she will have complete control over the inheritance. If you do not believe your child makes responsible choices, you can name someone else as the trustee to oversee the trust and the distributions.
You’ll be able to set conditions for how your assets are distributed. For example, you can require your child to reach a certain age or to graduate from college before allowing access to the funds.
A Personal Asset Trust℠ may also include provisions that allow the trust to be flexible, in case the laws that govern trusts change or in case your child chooses to reside in a state other than Massachusetts.
Is a Personal Asset Trust℠ Right for Your Family?
The Personal Asset Trust℠ has emerged as a popular asset protection tool, often used for inheritances of more than $100,000. It lets you protect your assets for your loved ones if they are on the wrong side of a divorce or a lawsuit or if they simply do not currently have the skills to manage the assets properly.
Everyone’s personal and financial situation, of course, is unique. However, if you have not added a Personal Asset Trust℠ to your existing revocable living trust, there are a number of good reasons to consider taking that step as soon as possible.
Creating a Personal Asset Trust℠ starts by consulting a Cape Cod estate planning attorney who will discuss your family situation and your estate planning goals with you and set up the customized Personal Asset Trust℠ that achieves the goals that are important to you.
Because a Personal Asset Trust℠ is a part of your revocable living trust, you will be able to make changes if necessary. You should review your living trust regularly with your Cape Cod estate planning lawyer to ensure that it is up-to-date and still reflects your goals and wishes.
Do You Have a Comprehensive Estate Plan?
An estate planning attorney can familiarize you with a number of other asset protection tools that include how to protect a retirement account for your heirs, establishing an irrevocable trust or setting up a limited liability company or a family limited partnership to shield your assets.
Proper estate planning takes thoughtful consideration. It can’t be done in haste, but if you need to set up a Personal Asset Trust℠ – or if you do not already have a revocable living trust in place – it is time to speak with a Massachusetts estate planning attorney.
If you have not already established a comprehensive estate plan, planning for what will happen after you pass away is essential for your family, if you are a business owner, or if others count on you for support.
Even if you do not consider yourself affluent but have a net worth of more than $200,000, you may need to establish a revocable living trust, and if you have children, you should consider a Personal Asset Trust℠. Other documents – a health care proxy, a durable power of attorney, and a contract to will, for example – may also be a part of your plan.
How Can You Learn More?
You can’t know what the future will bring, but you can plan for it. You can give your assets – and your loved ones – the protection they need. Remember the key to asset protection is to be sure to establish your asset protection plan before there is a problem and asset protection is needed.
To set up a Personal Asset Trust℠, a revocable living trust, a comprehensive estate plan, or if you would simply like to learn more about estate planning and the estate planning process, reach out promptly to a Massachusetts estate planning lawyer.
PAUL S.
