There is a great deal of flexibility available in planning for loved ones’ inheritances. A grantor may wish to leave certain assets to assist in grandchildren’s college expenses. Perhaps an adult child is going through a divorce and an individual doesn’t want to commingle an inheritance with marital property, possibly creating a property division dispute.
From asset protection to providing funding for specific needs, a trust can help provide different benefits. With the help of an attorney, an individual may be able to find the right trust that balances flexibility with any restrictions or other estate planning intentions. An attorney may also offer assistance by serving as the trustee of a trust, if needed.
Of course, estate planning often involves financial estimations, rather than exact calculations. Take the example of retirement accounts. An individual may need to draw from these accounts in later years, while still desiring for any remaining funds to pass to heirs.
However, an attorney might caution against simply designating one’s estate as the beneficiary for any remaining retirement account funds, as that might prematurely trigger tax liability. Although tax payments may eventually become due on tax-deferred assets, an attorney might offer strategies for finding the timing that is the most strategic and appropriate for a client’s particular circumstances.
It should also be noted that retirement accounts are generally non-probate assets, meaning they can be distributed under their particular beneficiary designations. Nevertheless, an individual may want to coordinate beneficiary designations in retirement accounts with provisions for probate assets that are contained in wills or trusts. An attorney can also help in that task.
Source: nj.com, “Your Money: Protecting adult child's inheritance from ugly divorce fight and poor money decisions,” Karin Price Mueller, May 12, 2014