Thursday, August 28, 2014
Inheriting in trust can be a difficult concept to decipher. To break it down, beneficiaries can inherit in one of several ways. The first way, and most common, is to inherit assets outright, where the assets are distributed free and clear from all oversight and directly to the beneficiary.
Alternatively, a beneficiary can inherit in trust. While this can mean many different things, oftentimes it means that when the deceased created an estate plan, it was established so that the beneficiaries did not inherit outright, but rather in trust. Thus, the assets that are inherited are titled in the name of a trust instead of the beneficiary’s name. The structures of these trusts vary widely.
Some trusts are designed to protect assets for the beneficiary from things such as divorce, creditors, lawsuits, and bankruptcy. The assets are for the use of the beneficiary, and distributions can often be made to the beneficiary for health, education, maintenance and support.
Sometimes a trust will prohibit distributions for specific items, or allow distributions only for specific purposes. If a beneficiary has any state or federal benefits, a special needs trust should be created to prohibit distributions for anything that the beneficiary’s benefits would otherwise cover.
See Carissa Giebel, Inheriting in Trust Can Protect Beneficiary, Green Bay Press Gazette, Aug. 25, 2014.