Don't Leave Your Money To Your Children: Leave It To A Trust

Most parents want to keep their estate planning simple. The simple estate plan is not the best plan when your children are vulnerable to lawsuits. If a parent dies leaving money to his children outright and one of the children has an outstanding civil judgment at the time of the parent’s death, the child’s creditors can seize the inheritance to satisfy the judgment. If the child puts the inheritance in a joint account with his spouse in an attempt to protect the money under the tenants by entireties exemption the creditor in most cases can reverse the conveyance as a fraudulent transfer placing the inheritance back in the child’s own name where it could be used to satisfy the judgment. Few parents anticipate their hard-earned estate going to a creditor of one of their children. Proper estate planning protects your money not only from your own creditors during your lifetime but also from unknown future creditors of your children.

The better estate plan leaves the families inheritance in trust for the children . Interest and principal is distributed to meet the children’s reasonable needs. The timing and amount of distributions is left to the discretion of the trustee of the childrens’ trusts. The parents can set us a common trust for all children or separate trusts for their respective children. The terms of conditions of each child’s trust may be different as appropriate for the child’s needs. If one child is highly unlikely to have legal problems during their lifetime the parents may distribute that child’s share of the estate outright without a trust.

As long as the trust document has a standard provisions known as a "spendthrift clause" no creditor of any child can invade their inherited trust. Under Florida’s new trust law a child can serve as the trustee of his own trust, with the discretion to make distributions to himself, and his inheritance is still protected by the spendthrift provision.

Making a will or living trust with inheritance trusts for your children is difficult to do properly without professional legal help. For estate planning attorneys, drafting a will or living trust with standard spendthrift protections for the children is not difficult. People concerned with asset protection during their lifetime should make sure that their money is protected after their death for the benefit of other family members. Trust planning is one of the best tools for this purpose.

posted by Jonathan Alper, asset protection and bankruptcy attorney,Orlando, Florida