Beneficiary Trust – Do You Have One?

Estate Planning is necessary to determine who will manage your affairs should you become incapacitated; and how your estate should be distributed after your passing. A properly drafted estate plan should include provisions that also address the option to keep the inherited share(s) inside a Beneficiary Trust.

How is this Accomplished?  Proper planning will include a Revocable Living Trust (RLT) which provides for a Beneficiary Trust within its framework. The RLT will include provisions ensuring your beneficiaries have the option to retain their share within your Trust long after you pass away, or they can choose to take the inherited share outright upon your passing.

Why is a Beneficiary Trust Important?  Inherited assets that are titled to the Beneficiary Trust are protected from creditors, divorce and remarriage, as well as Medicaid spend-down. In our litigious society and with the rising cost of nursing home care, having the option to provide beneficiaries with asset protection is very important.

Let’s take an example.  Bill and Mary create a RLT naming their two children, John and Susan, as equal beneficiaries upon the last to die. The RLT also included a Beneficiary Trust providing the children to each have an asset protected trust once they receive their inheritance. Bill dies in 2009 and Mary dies in 2011. When Mary dies, John wants to take his entire inheritance and purchase a new home. John’s distribution would be outright. On the other hand, Susan was involved in a nasty divorce just before Mary died, and she chose to keep her entire inheritance in her Beneficiary Trust until the dust settled. By doing so, Susan’s share was insulated from being taken by her divorcing ex-spouse.

Obviously Bill and Mary didn’t know Susan would marry the wrong guy, but through proper planning, their estate was spared from going into the wrong hands.

If you would like to learn more how your existing estate plan or the creation of an estate plan can include asset protection for your loved ones, please contact us at 888.222.1328 to schedule your free consultation.

About Morris Hall:
At Morris Hall, we have focused our legal practice on estate planning for over 40 years.  Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects.  We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.