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An
inheritance is the precious fruit of years of labor. It is
an expression of love. Nowadays, more than ever, an
inheritance is something that should be protected. All too
often, inheritances are squandered or lost because of a lack
of planning by those giving it. Read on to discover how to
easily change that.
There are many dangers that can threaten the inheritance you
leave your children or heirs. The number one concern of many
of the people that I talk with is that an inheritance will
be lost if the beneficiary gets divorced. In today’s
society, the probability of that occurring is greater than
ever before, regardless of religious beliefs. They dread the
thought of their money being lost to a departing spouse
instead of remaining with their child or grandchildren.
An often overlooked danger that many people fail to
recognize is the threat of loss from lawsuits or creditor’s
claims. We live in a very litigious society. If the person
receiving your estate is in even a simple car wreck, the
chances are high that they’ll be sued. Heaven forbid someone
should die in the accident. The estate you left is like a
pot of gold just waiting to be discovered by predatory
lawyers.
Your heir could get into financial difficulty. A business
could fail. Whether through mismanagement or unforeseen
circumstances, if your heir gets into financial difficulty,
creditors will go after the money inherited.
Receiving your inheritance could also cause your heir to
lose benefits they would otherwise be entitled to. For
instance, if disabled and receiving government benefits,
receiving an inheritance could cause them to lose those
benefits. There are times when the government would claim
those funds in repayment for benefits previously paid. A
college student could lose scholarships that are based on
financial need, as well.
It’s important to take a long-term perspective on the estate
you leave behind. If handled properly, even a modest
inheritance can be a legacy that will provide financial
security to your loved ones for generations. Therefore, it
makes sense to not have to pay Uncle Sam estate taxes every
time the money passes from one generation to the next.
The person receiving your inheritance may already be
financially successful. If their estate isn’t already large
enough to trigger estate taxes when they die, the receipt of
an inheritance could put them over the limit. The result is
as much as 50% of the money you leave behind could go to
Uncle Sam when your child passes it on to your grandchildren
and when your grandchildren pass it on to your
great-grandchildren.
As you can see, there are many reasons that it’s important
to protect an inheritance. And it shouldn’t be the child’s
responsibility to do so. Once they receive it, there are few
options available to them to protect it. Instead, the
parents need to take responsibility to protect what they
leave behind.
Traditional methods of protecting the estate you leave
behind meant your heirs would lose control. An outsider
would be responsible for how the money was invested and
would control the distributions to your heir. These methods
were cumbersome and expensive–which is why most people
didn’t use them and instead distributed their estate
outright.
The solution to these problems is a new tool called a
Beneficiary Trust. This trust allows the estate you leave
behind to be protected from loss due to divorce, the claims
of creditors or even bankruptcy. It allows your wealth to be
passed from generation to generation without losing up to
50% of it in taxes each time it is transferred. It won’t
affect eligibility for government benefits or scholarships.
Best of all, your heir retains full control. The heir makes
all the financial and investment decisions. Virtually
anything that can be accomplished by the heir without this
trust can be done with it. And the costs involved are small
enough that it should be used even for small estates.
A Beneficiary Trust is an extremely flexible vehicle, yet
isn’t understood by many attorneys. If you have questions
about how a Beneficiary Trust can be used in your situation,
feel free to give me a call or send me an email.
Mr. Voudrie is a Certified Financial Planner, nationally
syndicated columnist and the President of Legacy Planning
Group, Inc., a Private Wealth Management firm in Johnson
City, TN. For more information call 1-877-827-1463 or email
jeff@guardingyourwealth.com. |
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