Protecting your family legacy with the use of trusts

Far too many people pass over trusts when beginning the estate planning process. They may think that trusts are too complicated or will cause more problems than they solve. In reality, however, trusts offer a host of benefits, especially for those with substantial assets or special family situations. A trust can protect your estate from massive estate tax obligations. They also are a buffer between your heirs and income tax obligations after you pass. Taxes aren’t the only factor to consider, either.

There are many cases where a trust can offer your family a host of estate planning benefits. For example, if you have an autistic child or grandchild, a special needs trust can help protect your heir from financial abuse or loss of state benefits. They can also be helpful if you worry about the potential for one of your children (or grandchildren) divorcing. After all, divorce could mean that your heirs lose out on half of what you set aside for them.

Trusts help protect how assets get distributed to beneficiaries

Creating and funding a trust as part of your estate plan allows you to limit the disbursement of assets from the trust. For example, you may place a limit on how much capital a beneficiary can withdraw in a single year. In other cases, you may specify that trust assets can only be used for certain expenses, such as housing or medical care.

That extra control over how your executor/trustee manages your assets can help ensure that your heirs don’t do something foolish with the assets you left behind as your legacy. Receiving a lump sum windfall can sometimes prompt people to make poor decisions. Depending on the actions of your heirs, a standard inheritance could be vulnerable in a divorce as well.

Proper legal steps can protect an inheritance in a divorce

The single biggest risk to an inheritance in a divorce is the potential for commingling. Commingling means mixing separate property with marital property. In general, Georgia divorce law allows spouses to retain inherited assets as separate property. Separate property is not typically subject to division in the divorce process. However, if your heir deposited the inheritance as a lump sum into a joint bank account, he or she could end up splitting those assets in a divorce.

A trust helps prevent that from happening. Your heir will not have full possession or control over the assets in the trust, which means that his or her spouse will not have any legal claim to those assets in a divorce. By taking steps now to create and fund a trust, you can help protect your legacy and ensure your assets remain with the people you intend to receive them.

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Kevin Tharpe

With 25 years of experience, Kevin understands how estate planning, special needs planning, and government benefits programs work together. This is a crucial element of a thorough plan. He explains your eligibility for benefits programs and ensures that you do not make costly mistakes that may disqualify you or deplete your assets.

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