Texans who are considering ways to provide for their loved ones after they have passed will frequently be torn between wills and trusts. For some, the idea of inserting a trust into the will is taken into consideration. There could be a variety of reasons for this, but one that is common is to save on taxes after the testator has died. For 2017, the estate tax exemption in almost $5.5 million for an individual and $11 million for a couple. However, this justification is being surpassed by parents who are trying to protect a child’s assets if there is a divorce. Understanding how a trust can protect these assets is key when deciding if this is the strategy to take.
Often, if an inheritance is given to a son or daughter and it is combined with assets that are shared as part of the marriage, the inheritance might become marital property if it is linked to the assets from the marriage. With a trust fund, it will remain in the child’s name and be shielded if the marriage ends. Since a trust can be more complicated than a will, many people try to avoid them. Plus, there will need to be a trustee to oversee it. But there are certain instances in which protecting a child with a trust makes sense.
If a child is 18 or younger, the marriage issue will likely be on the backburner. But a younger person who inherits substantial assets is in danger of making mistakes due to inexperience. A trustee can guide them to be smart with the funds available to them. A child who is recently married can have problems in that marriage as time passes. There could be a multitude of reasons for this, but parents might want to see how the marriage is going before deciding on a will or a trust. If there is endless dispute in the marriage or something seems amiss, the trust is a wise move.
It is never easy to think about what life will be like for loved ones after death, but taking care of one’s heirs is imperative, particularly when there are assets that can be of great value and grandchildren to think about. Knowing how wills and trusts work and the value of each can be accomplished by speaking to an attorney experienced in estate administration. This is a solid way to assist beneficiaries while protecting them from outside issues.
Source: Nasdaq, “A Trust Can Protect Your Adult Child’s Assets from a Failed Marriage,” Lisa Brown, March 6, 2017