At Duncan Legal, we often hear from parents who are concerned about the best way to protect their children’s inheritance. From job instability to potential divorces, and worries about whether a child can manage a substantial inheritance wisely, these are all legitimate concerns. Fortunately, there are a number of effective strategies available to help shield your children’s inheritance from various risks, ensuring their financial security and your peace of mind.
Using Trusts to Safeguard Inheritances
Trusts are a versatile and powerful tool for protecting an inheritance. Beyond avoiding probate and reducing taxes, trusts can be customized to provide robust protection against threats like creditors or poor financial decisions. Here are some trust options to consider:
Discretionary Trusts
In a discretionary trust, the trustee has full control over trust distributions, making it an excellent tool for protecting the inheritance from outside threats. If your child is facing issues like bankruptcy or divorce, the trustee can withhold distributions, preventing these assets from being misused or claimed by creditors. This flexibility allows you to provide for your child while protecting the inheritance from external risks.
Support Trusts
Support trusts require the trustee to make distributions for specific purposes, such as health, education, or maintenance, ensuring that your child’s basic needs are met. While this type of trust offers protection from most creditors, certain super creditors like those seeking child support or alimony can still access the assets. However, for many families, this trust structure strikes the right balance between support and protection.
Spendthrift Trusts
A spendthrift trust protects your child’s inheritance by preventing them from transferring or accessing the trust assets in ways that might jeopardize their financial security. This type of trust is particularly useful if you’re concerned about your child’s ability to manage money or want to protect the assets from most creditors.
Tailored Protection for Your Family
If you’re worried about safeguarding your children’s inheritance, Duncan Legal can help you create a customized estate plan that provides the right level of protection. Contact us at (303) 394-2358 to discuss your options and learn how we can help secure your family’s future.
