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AATEELA Blog

Friday, March 2, 2012

Inheritance Trust

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

Marie died and $400,000, which was all of her estate, went to her son, Chris.  Chris was married to Jane and they had three children.  Chris died two years later giving all of his assets, including those he inherited from his mother, to his wife.  After a few years, Jane married Tim, a widower with one child.  Jane and Tim did not have a prenuptial agreement, and they just decided to put all the assets each of them owned in joint names.  Jane died a year after marrying and everything she owned went to Tim.  When Tim died everything went to his child.  Nothing went to Chris and Jane’s children. 

Do you want your son’s widow to give your son’s inheritance to her new husband rather than your grandchildren?  If not, you may want an “Inheritance Trust.”

Some other names for this type of trust are “dynasty,” “heritage,” or “legacy” trusts.

This trust provides powerful protection for the individuals who inherit from you.  How does an inheritance trust work?  Upon your death, the monies a person inherits from you will be deposited directly into this trust rather than being given to them out right.   The funds that are placed in this trust will be protected from divorces, creditors, lawsuits, and bankruptcy.

Using an inheritance trust, we will rewrite the story about Chris.   When Marie died, $400,000 went to Chris. This time Marie has created an irrevocable inheritance trust naming Chris as the Trustee and the sole beneficiary during his lifetime.  When Chris dies, whatever remains in this Trust will go to his three children.  Marie dies, and Chris puts the $400,000 in this inheritance trust.  Chris decides how the funds will be invested, and he has the right to withdraw the money under certain circumstances. When Chris dies, those funds will go to his children and stay in Marie’s family. This trust provides extraordinary protection for Chris because the money will be protected should certain life tragedies occur, such as a serious illness, financial reversal or divorce.





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