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The Benefits of a Lifetime Trust

Posted on 08 Jun 2011 by admin | Filled under: uncategorized

If you're considering leaving a substantial inheritance for your beneficiaries, don't ignore the benefits of a lifetime trust. A lifetime trust is just what it sounds like – your beneficiary's inheritance is held in trust, to be disbursed to him or her over his or her lifetime. Why is this a good idea? The benefits depend on the age of your beneficiary.

Minors Can't Inherit Money Outright

If your beneficiary has not yet reached adulthood, then his or her inheritance will need to be held in some type of trust, otherwise a court-appointed guardian or conservator will be needed to manage the inheritance until your beneficiary reaches adulthood. So, if you want to avoid court involvement, you have a choice of what type of trust to arrange. If the inheritance is substantial, a lifetime trust might be a good option. Instead of a typical trust, which ends when a beneficiary reaches age 21, 25 or 30, a lifetime trust stretches throughout the beneficiary's entire lifetime. Sound restrictive? Actually, it could be helpful.

When a trust terminates, your beneficiary gets access to all of the trust property. While this may seem like a good thing, it actually opens him or her up to all kinds of risk.

Even For Adults, Inheritances Come With Risks

Once your beneficiary reaches adulthood (and even if your beneficiary is already an adult), it may not be a great idea for him or her to have full access to a substantial inheritance.

There's a risk that your beneficiary won't be wise with his or her money – having full access to the entire inheritance could mean that it would be wasted on clothes, jewelry, cars, or vacations within a few years. A lifetime trust can help stem the tide of spending and make sure that the inheritance lasts.

Further, if your beneficiary has full access to the inheritance, then so do his or her creditors. Even if your beneficiary is extremely responsible, lawsuits can arise from divorce or professional liability claims, and an inheritance can disappear quickly. A properly established lifetime trust can protect your beneficiary's inheritance. A lifetime trust can protect your beneficiary not only from his or her own poor choices, but also from the actions of others.