How To Protect Holiday Inheritance From Creditors, Divorce, Or Financial Mismanagement

In this article, you will discover:

• Whether creditors can take your children’s inheritance
• How you can protect your child’s inheritance from future ex-spouses
• What a spendthrift clause does and whether your trust should include one

Can Creditors Take An Inheritance I Leave To My Children?

If you leave an inheritance by will, creditors can take those assets. Specifically, if you owe a debt, creditors can file a claim against you, and they will be paid before any beneficiary.

This provision does not apply to a trust. An inheritance is much better protected by a trust, because creditors are not notified when you pass away.

How Do I Protect An Inheritance From My Child’s Future Ex-Spouse?

You would want to put that inheritance in a trust and specify your child as the beneficiary. If the child pre-deceases you, you would designate the inheritance to go directly to your grandchildren. That will keep any spouse out of the picture entirely.

What’s The Difference Between An Outright Gift And Using A Trust?

An outright gift is a current event; it happens right then and there. By contrast, a trust can designate a gift to be given over time or at some future point.

What Legal Tools Can Help Protect Assets From Being Wasted?

Consulting a skilled financial planner would be the first step. Then, when you create and fund your trust, you want to include a spendthrift clause to protect the money from foolish spending and creditors.

What Is A Spendthrift Clause, And Should I Include One?

In essence, a spendthrift clause helps the trustee maintain control over how funds are distributed to beneficiaries during the trust’s lifetime.

The clause is added to a trust for the benefit of beneficiaries who don’t manage their money well and may waste their inheritance. It also protects you from creditors by assuring they can’t invade the trust to get money that would otherwise go to a beneficiary.

How Can An Attorney Help Me Explain Why These Protections Are Necessary To My Family Members?

The best strategy is to have your attorney meet with the family and go through what the trustors want to do and why that’s important. They can also hand out written materials, including summaries of what a trust does and its different aspects, to help educate your family.

Still Have Questions? Ready To Get Started?

For more information on protecting your inheritance from creditors, an initial consultation is your next best step.

Get the information and legal answers you are seeking by calling (864) 271-7940 today.