Reason #5 to Review Your Estate Plan this Year: Take Advantage of the Protective Inheritance Trust

Are you a planner? One of those people who makes lists, plans out their days, weeks, and months down to the minute? Maybe you still carry around one of those handy day planners? The world needs more planners like you. We get you. We are estate planning attorneys, after all. Not so much a planner? That’s okay– we don’t mind doing it for you.

We take pride in the fact that we plan for just about everything, whether it’s best-case scenario or worst-case. We like to look at situations from every angle and make sure that there’s a plan in place for whatever needs arise. In other words, we hope for the best, but plan for the worst. This is why we’ve implemented the Protective Inheritance Trust (PIT).

Reason #6 to Review Your Estate Plan this Year: Take Advantage of the Protective Inheritance Trust

The PIT is like leaving your child’s inheritance in a secure vault and giving them the only key to open it versus leaving it on their front porch where anyone can snatch it up. Here’s a couple of situations that will explain why funds in a regular trust can end up in an unintended beneficiary’s hands:

  • Divorce: Dad and Mom passed away with a trust that left a modest inheritance outright to their three married children. Like most beneficiaries, the youngest daughter put the money into a joint account with her spouse, and then she used some of the inheritance to help pay the mortgage, put the kids through school, etc. But the daughter set aside most of her inheritance for later retirement. The daughter had no idea that she had accidentally converted the inheritance to community property. When divorce happened 3 years later, guess who was awarded half the inheritance? The ex-husband. Divorce is the #1 killer of inheritances!
  • Creditors and Lawsuits: Mom passes away with a trust leaving the inheritance outright for her responsible adult daughter. A few months later, the daughter has a business deal that turns south and is sued in Arizona state court for $1 million. The lawsuit is frivolous, but the jury is not convinced. The inheritance is gone! A Lawsuit can sneak up on almost anyone – car accidents, homeowner claims, business claims, government claims – you name it.

So how is a Protective Inheritance Trust different from a basic living trust? With a PIT your beneficiaries get the best of both worlds. On the one hand, the beneficiary may have full flexibility and control over his or her own Protective Inheritance Trust-– control how the assets are invested, decide how and when money is distributed, and even direct who may receive the left-over assets when that beneficiary passes away. On the other hand, if a crisis occurs, the assets in the trust are protected because technically the beneficiary does not “own” the assets. For example, if a divorce happens, your child can “lock down” the trust assets from the ex-spouse. Even in this case, the beneficiary may continue to control his or her inheritance while enjoying additional asset protection!

We strongly encourage all of our clients to take full advantage of the Protective Inheritance Trust. In fact, we now recommend it as standard equipment in just about every new Living Trust we do, and it is the most common “upgrade” we add to Living Trusts already in existence.

If your trust was created more than a few years ago, you may not have a Protective Inheritance Trust, thus making your assets vulnerable for unintended beneficiaries. Do not let this happen! Come see us soon to ensure that your loved ones are fully prepared for all those “unplanned” events life throws at them.


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