The Legacy Inheritance Trust | Asset Protection for Your Children

Too often, when we review a trust based estate plan for our clients, the distribution pattern says “outright to the kids at 25, 30 or 35.”  The issue with this is what happens if one of the children gets a divorce after 35 or pass away or life just throws them a curveball.

What if there was a way to offer a lifetime of asset protection for your beneficiaries, so that whatever you’ve worked so hard for could be protected for your loved ones?  Well, there is and it’s called a Legacy Inheritance Trust ™ or LIT for short.

The Legacy Inheritance Trust™ Explained

The Legacy Inheritance Trust is a separate share trust created out of a revocable living trust or a Castle Trust™, that offers the opportunity of a life time of asset protection from the beneficiaries.

Instead of outright distributions through beneficiary designations or the launching pillow cases of money approach of typical trusts that say outright at 25, 30 or 35, the beneficiaries have the opportunity of receiving the money so it’s protected for their lifetime from a divorce, a lawsuit, creditors and when the pass away the money stays in the bloodline, versus going to an in-law who may remarry.

Lawsuit Protection with a Trust

One of the benefits of the Legacy Inheritance Trust™ is the protection of lawsuits for the beneficiaries.  Whatever the child or beneficiary decides to leave in trust could be protected from a lawsuit or creditor.  For example, if they were sued, then the assets in trust would be protected from that lawsuit due to the nature of the trust.

This is very different than your typical revocable trust where once the money is in the hands of the beneficiaries, it’s free for the taking.  The assets could be attached in a lawsuit or creditor action.

Divorce Protection with a Trust

The assets that are kept inside of a separate share Legacy Inheritance Trust™ would be protected from a potential divorce.  The assets would be shielded and not even on the table as it relates to assets to be divided in a divorce.

Divorce rates are increasing, so whether we like it or not, it should be something that is factored into how we leave things to our beneficiaries and our children.

When you leave things outright to children our beneficiaries through beneficiary designations or through a revocable living trust, you are not protecting them from a potential divorce.  That is why looking at leaving things in trust makes so much more sense.  You never know when life may throw a curve ball.

The Pros and Cons of Building Legacy Inheritance Trust™ Provisions into Your Trust

At the end of the day, you have to decide if building in the LIT provisions in your trust makes sense.  So, it makes sense to weigh out the pros and cons of going with the “pillow case of money” approach or the LIT approach.

The “Pillow Case of Money” Approach

If you name your child or beneficiary outright you are taking a pillow case of money approach to you distribution plan.  You are basically launching a pillow case of money at your beneficiaries.  This could be a problem for 1 of 2 reasons.  First, your beneficiaries might be financially immature.  The bigger reason would be second, and that is that society if more litigious than ever.

For example, if you were to name your child as a beneficiary of an IRA, then they go through a lawsuit or divorce, that money could be lost.  A recent US Supreme Court case has held that an inherited IRA does not have the same protections as your IRA does.

The advantage of just relying on beneficiary designations is that it is a simpler approach.

The Lifetime of Asset Protection Approach

The alternative to the pillow case of money approach is of course the Legacy Inheritance Trust™ approach where you offer the opportunity of a lifetime of asset protection for your beneficiaries.  The trade-off for this obvious benefit is that there is a little bit more complicated trust administration for your beneficiaries.

If they want to leave the assets in the trust then a trust tax ID number would have to be created.  This is not hard and can be done on the IRS website.

Take the Next Step and Attend A Clarity Builder Workshop

If you want to learn more about wills and trusts and how trusts work, attend one of our upcoming, free, Clarity Builder Workshops where an attorney goes over all ins and outs of estate planning with wills and trusts.  The estate planning workshops typically are held at one of our offices in Ann Arbor, Bloomfield Hills, Brighton, Lansing, Livonia, or Novi.  These are free, but you do have to register because the seats fill up fast.

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