If you?ve even heard of a discretionary lifetime trust, chances are you think they are used for young, troubled, or financially inexperienced beneficiaries. But, in our modern times filled with frivolous lawsuits and high divorce rates, discretionary lifetime trusts can be part of any estate plan and should be considered for all of your beneficiaries, minors and adults alike.
What Exactly is a Discretionary Lifetime Trust?
Discretionary lifetime trusts are a type of irrevocable trust that you fund either during your life or after you die. This happens by gifting your assets into the trust for the benefit of your beneficiaries during your life, or by transferring your assets into the trust for the benefit of your beneficiaries after death.
The trust is discretionary because you define the limited circumstances when the trustee of your trust can distribute assets for the use and benefit of the beneficiaries. For example, the trustee may be allowed to use trust funds to buy a home, pay for education expenses, start a new business, pay for health care costs, or even a wedding. When such a trust is funded with enough assets that are invested wisely, and if you choose the right trustee who will ensure your wishes are followed, the trust funds could last for the beneficiary?s entire life.
Can a Discretionary Lifetime Trust Really Protect an Inheritance?
While no plan is completely bullet proof, with a discretionary lifetime trust, each of your beneficiaries will at least have a fighting chance against lawsuits and divorcing spouses because their inheritance will be segregated inside of their trust, away from their own personal assets, and out of their control. Putting a beneficiary?s inheritance inside this type of protective ?box? let?s the world know that the inherited assets do not belong to the beneficiary, and that he or she can?t simply do whatever they want with the assets. Instead, only the trustee can reach inside the box and, based on your specific instructions, pull funds out for the benefit of the beneficiary. Generally speaking, creditors, predators, and divorcing spouses are blocked from reaching inside the box and taking property out.
After the beneficiary dies, whatever remains inside their box will pass to the heirs you choose. For instance, you could decide to have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary lifetime trusts that will protect the inherited assets and keep them in your family for decades to come.
What Should You Do?
While this may sound too good to be true, it isn?t. Regardless of whether you have an existing estate plan that hasn?t been reviewed for a long time, or you still need to buckle down and get with an attorney to do your planning, chances are you could benefit from incorporating discretionary lifetime trusts into your estate plan.
My firm is available to meet with you and discuss your options. Give me a call to schedule your appointment today. Your family will certainly be glad you did.
