Texans who are constructing an estate plan might wonder whether it would be preferable to hand certain assets over to children and other heirs before death. They believe that this is a sound strategy to ensure that their assets stay in the family’s hands, and their children get everything the testator wants without having to go through probate and worry about ancillary factors. This is often a mistake as it fails to provide certain protections. Understanding this and formulating strategies to maximize protection is a wise step with any estate plan.
Placing assets in trusts is a better solution than just handing them over. There are several different kinds of trusts to choose from, but there are ways to shield them from creditors. This is especially true when it is managed by a third-party trustee. If, for example, there is a divorce, a separate trust can make certain assets are not mixed together. If assets are in a trust, they might be protected from the estate tax if it stays in place in its current form.
When heirs are not of sufficient age or maturity to handle a sudden windfall, this too is a time when a trust should be considered. A major error that people face is when a person who is not equipped to oversee a large amount of sudden wealth will lose some or all of it as a result. A special needs person can have a specific trust to protect him or her and maintain eligibility for various benefits including Medicaid. Some might want to think about an incentive trust so their heirs will achieve certain goals before they have access to what is in the trust or if those assets are used to achieve the testator’s desires. Charitable trusts can shield assets until the heirs determine how they should be distributed.
While it might sound complex, a legal professional who is experienced in tactics to preserve assets and achieve the goals of the testator can help with this form of estate planning. Before doing anything that will be a mistake in hindsight like simply handing over assets to the prospective heirs, it is imperative to talk to a qualified lawyer.
Source: Forbes.com, “Don’t Just Sign Over Your Assets to Your Kids,” Mark Eghrari, Oct. 2, 2017