By: Bruce Duggan, Esq.
Many parents want to leave their assets to their children and, ultimately, to their grandchildren. However, leaving your assets directly to your child through your Will, and stating that if your child predeceases you their inheritance shall pass to your grandchildren does not ensure your child’s inheritance will be protected for a couple of reasons.
The first reason is once you distribute assets directly to your child, you lose control over what happens to your child’s inheritance. For example, if your child survives you, receives their inheritance, and passes away shortly thereafter, the terms of your child’s Will control how their assets, including their inheritance, will be distributed. In most cases, this means that your child’s assets will be distributed to their surviving spouse and/or distributed by way of intestacy laws if your child did not have a Will. Therefore, by distributing assets directly to your child, such assets may not stay in your bloodline.
The second reason is once you distribute assets to your child, their inheritance could be at risk in the event they get divorced or have creditors. If your child did not execute a prenuptial agreement, or if your child does not keep their inheritance separate from their spouse and commingles it with other marital assets, your child’s inheritance could be subject to equitable distribution if they get divorced. Further, once you distribute assets to your child directly, such assets could be subject to your child’s potential creditors.
For these reasons, your family may benefit from a Family Protection Trust in your estate plan. This type of Trust can be established irrespective of your child’s age and be structured to last for the duration of your child’s lifetime. This Trust gives you more control over what happens to your child’s inheritance because you decide who will receive any assets remaining in the Trust when your child passes away. Therefore, you can keep such assets in your bloodline. Also, you choose who will manage the Trust. You determine how the funds in the Trust are to be spent. You decide how your child can access the income and principal of the Trust. In addition, by placing your child’s inheritance in a Family Protection Trust, you provide an additional layer of protection from creditors or from equitable distribution in the event of a divorce.
Therefore, Family Protection Trusts are a great tool for you to consider to ensure assets stay in your bloodline, while at the same time providing protection in the event your child has creditor concerns or gets divorced. Call our office today at 856-489-8388 to schedule an appointment to discuss how a Family Protection Trust may benefit your estate plan.
