Categorized | Features, Legal Matters

How to Protect Your Loved One’s Inheritance

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Today more than ever, parents and grandparents are concerned about how children and grandchildren will handle their inheritance.

By Linda T. Cammuso, Esquire

Today more than ever, parents and grandparents are concerned about how children and grandchildren will handle their inheritances. Rightfully so.  Statistically, inherited money is spent at a considerably faster rate than a person’s earned or saved money. Whether because your child/grandchild is young, not good at managing money, or is struggling with an addiction you may fear that assets will quickly vanish in their hands.

In addition to careless spending, your loved one also stands to lose inherited assets unexpectedly:

Divorce: With today’s skyrocketing divorce rate, many inheritances may be lost to spouses in divorce proceedings

Bankruptcies: Inheritances can be quickly lost to bankruptcies, foreclosures and other creditor problems

High-risk Professions: Beneficiaries in high-risk professions could become the target of a lawsuit and lose their inheritance to a judgement creditor

Special Needs: Beneficiaries who are disabled could lose certain benefits such as Medicaid or subsidized housing if an inheritance raises their assets or income beyond program limits

College-age Children: A beneficiary who is college-age or the parent of a college-age child could incur adverse college financial aid consequences from an inheritance

Linda CammusoThe good news is that if you leave all or a portion of your children’s (or other beneficiary’s) inheritance in trust for their benefit, you can protect it from them and their outside financial exposures with some simple modifications to your estate plan. An estate planning attorney can develop a straightforward trust arrangement through which your heirs can benefit from their inheritance and not have it considered an asset for creditors, divorces, public benefits or even their own imprudent spending.

Your estate plan presents the perfect opportunity to provide a level of asset protection for your children (or other beneficiaries) that they could not achieve for themselves once the inheritance comes into their direct name. The reason behind that is that the laws of most states do not allow a person to establish a trust with their own assets and benefit from it while simultaneously shielding it from their creditors; yet a person can establish a trust with their assets, for the benefit of someone else, and with the right language protect the trust assets from third party-beneficiaries’ creditors.

If you are certain that your estate plan protects your heirs against losing assets because of divorce or other life situations listed above, great. If, however, you are not sure, it’s time to contact your attorney or one who specializes in estate planning to discuss your concerns and to develop proper legal solutions.

Linda T. Cammuso is a founding partner of Estate Preservation Law Offices located in Worcester, Massachusetts. She is a skilled estate planning and elder law attorney and has authored many articles on elder care and long-term estate planning issues. She has appeared on Money Matters Radio and has been a speaker for various community and professional organizations. 

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