Boulder Estate Planning Legal Blog
Estate planning strategies and the creation of trusts are often used to protect a family’s assets from high tax burdens or other preventable attacks on an estate. The most common way for anyone seeking to control the division of their estate is by drafting a will, which mandates how the estate assets are divided. Some people instead choose to place their money into a trust that may offer additional protection for the assets in an estate. Traditionally, parents planning a bequest to their children or grandchildren might set up a trust themselves for the heirs’ benefit; however, there are alternatives to a benefactor-initiated trust that may work better for your family.
An “inheritor’s trust” is a trust that is set up by the heirs to an estate before the death of a benefactor. Using an inheritor’s trust can further help protect the assets of an estate from creditors, divorcing spouses, and high tax burdens. Unlike traditional trust instruments, which are designed from the top down, an inheritor’s trust is designed to be initiated from the bottom up. This change represents a growing movement for beneficiaries and heirs to an estate to take a more active role in managing the estate while the benefactor is still alive.
Although inheritors need not know the exact amount of their inheritance to create an inheritor’s trust, the trust still must be created with the consent of the benefactor. This could create uncomfortable conversations, as the benefactor must be alive at the time of its creation for the trust to function properly. If properly created, an inheritor trust can protect a family’s assets for generations as the trust continues to function, even as the generations pass. Anyone seeking to leave a legacy for their children or other heirs should research and ask questions about the possibility of an inheritor’s trust to manage and protect their assets most effectively.
Inheritor’s trusts can be more effective than standard trusts because the heirs have more flexibility in managing and modifying the trust itself as tax and inheritance laws may change. For example, a standard trust may be difficult to modify as a benefactor ages and becomes less interested in or able to manage their assets. By creating a bottom-up inheritor’s trust, families can ensure their assets are protected without saddling the benefactor with difficult decisions and confusing legal changes as the benefactor continues to age.
While inheritor’s trusts have been useful in estate planning in recent years, many states have restricted the ability for families to create legacy trusts, which include inheritors trusts and can exist for centuries and prevent estate and other taxes from being collected across generations. If you are seeking to develop an estate plan that protects your heirs from unnecessary taxes or other expenses, contacting a qualified Colorado estate planning attorney can help you decide the best course of action, and also start the formation of a trust
If you or a loved one is looking for advice and counsel on how to best manage your estate and assets, the Braverman Law can help you make the best decision and properly create any legal instruments to effect your final wishes. Our qualified Boulder trust and estate attorneys and certified financial planners can help you to protect your and your family’s assets, both while you’re living and after you pass. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.
