When family members receive an inheritance outside of a trust, the funds and property received are often spent or lost within just a few days or weeks. Money received as an inheritance may appear to be “free money” to be spent on luxuries or vacations. Unfortunately, that “free money” might be needed later for the necessities of life – such as the support of children, elder family members, to pay for education, or as the down payment for a home.

Your children can benefit from your asset protection trust planning.  Maybe one of your adult children isn’t really good with money — a trust can protect their inherited assets from creditors.  If a child owns their own business or has a professional practice, they may be hit with a lawsuit.  A Living Trust can protect their inheritance from being collected in a judgement.  In the event that one of your heirs has to file for bankruptcy, leaving their inheritance to them in a trust can shield it from the bankruptcy proceedings.

Even worse, without careful planning, heirs may inherit property that is inappropriate for them or their circumstances.  For instance, if you know one of your children has a drug, alcohol or gambling problem, you can create a trust controlled by a trustee that you name to distribute money in the way that you describe.  You can include conditions for distribution of funds, such as completion of rehab.  Using a trust, you can indicate when it would be appropriate for your children to receive control of their inheritance.

By making a gift to heirs through a trust rather than directly, you have the opportunity to protect the assets and ensure that the funds that parents or grandparents have spent decades accumulating, meant to pay for a college education, a special wedding or a first-time home purchase, will actually be spent as the family intended.