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A lifetime discretionary trust may be a good option to consider rather than handing over a lump sum.

A lifetime discretionary trust may be an option to consider if leaving an inheritance without restrictions is not a good idea because in these trusts, the trustee does not have to distribute assets in any specific way but can choose to do so whenever appropriate. Recently, Wealth Management wrote about their benefits in “The Perils of Outright Distributions and Gifts.”

The benefits include:

  • If the trust is properly structured, the assets are sheltered from any creditors of the beneficiary.
  • If the beneficiary gets divorced, trust assets can be protected from the ex-spouse.
  • If the beneficiary becomes incapacitated, it will not hurt the trust.
  • By keeping the assets in a trust, it is more likely that there will still be something left for future generations even if the initial beneficiary is a spendthrift.
  • Assets left in the trust will not be subject to unnecessary estate taxes when the beneficiary passes away, if the trust has been structured properly.
  • The beneficiary will not be able to sell off trust assets for fast cash at bad market times.

An estate planning attorney could guide you in considering a lifetime discretionary trust.

Reference: Wealth Management (May 31, 2016) “The Perils of Outright Distributions and Gifts.”

For more information on asset preservation and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.