Inheritance Protection Trust to Keep Assets in the Family

With the size of estates having grown today to where middle class families are leaving substantial bequests to their children, the trend is toward establishing trusts for the children to keep the inheritance in the bloodline. In the case of your children, there are a number of benefits to leaving assets to them in a trust: (1) the assets will be protected from their spouse in the event of divorce (2) the assets will be protected from their creditors in the event of a lawsuit or other financial hardship, and (3) on your child’s death, the unused assets will go to your blood relatives (usually grandchildren) instead of to in-laws.

Whereas with a will your estate plan usually dies when you do, with an Inheritance Protection Trust (IPT) your wishes will go on for thirty, forty or even fifty more years after you.

These trusts provide that, during your children’s lifetimes, they have complete access to the income and the principal of their Inheritance Protection Trusts – so that you’re not giving them a “gift with strings attached” or “ruling from the grave”.

But when your child dies, you would like the trust assets, which may have grown considerably, to go to your grandchildren. If the grandchildren are under age thirty-five, we recommend that the funds be held in trust for them until such age, with the trustee (usually another relative) using the assets as may be needed for their health, education, maintenance and support. If one of your children dies without leaving children of their own, then the trust funds go to their surviving siblings.

Keep in mind that, without an Inheritance Protection Trust, if your son or daughter dies, the entire inheritance you have left may go to a son-in-law or daughter-in-law who may later get remarried and share your hard earned assets with a complete stranger. If you wish to favor an in-law, there are options to provide them with an income for life.