How can you ensure your inheritance is protected long after you're gone and that endowments go to the right people? Mike Collins with the Collins Firm has some tips to factor into your estate planning.
WASHINGTON — Part of estate planning is making sure your inheritance goes where you’d like after your death — but how can you ensure endowments are protected long after you’re gone?
People focus on wills and avoiding probate during estate planning, but people still need to focus on what’s going to happen after a recipient gets the inheritance, too, said Attorney Mike Collins with the Collins Firm.
“What if they get sued in the next month? What if they die prematurely? What if they are incapacitated down the road? What if they are in rocky marriage and there’s a divorce?” Collins asked. “It’s all about how we protect their inheritance once we’re gone and they’ve got it. How do we keep our money in our family instead of some creditor or bankruptcy court or an in-law?”
One option is to keep the shares in a “reservoir trust” for inheritors, Collins said. That means rather than the inheritors getting outright ownership once the person dies, the trust’s set of instructions gives the inheritor principal for certain purposes, such as medical and education expenses.
“It’s up to you how much discretion you give them in using their share — but the key is that the trust itself is so structured,” Collins said. “You take advantage of these provisions such that the money in the trust fund is protected from lawsuits, bankruptcy, divorce courts and interfering in-laws.”
“So in other words, to keep your money in your family, you can do things for your children or survivors that they can’t do for themselves.”
Collins said beneficiaries can even be named their own trustee, meaning they manage the trust.
No matter your process, it’s vital to have a plan to protect your inheritance from interference and threats “because it happens so frequently,” Collins said.
In many respects, the less you have the more important it is to have a plan because there is a smaller margin of error, Collins said.
“You want to make sure whatever it is you’re able to leave family isn’t frittered away by inexperience or bad fortune or costs you can avoid.”
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