When it comes to estate planning there are several types of tools you can use, depending on your circumstances. One such estate planning tool to protect your estates beneficiaries from future potential family law matters, or other creditor situations, it to leave their inheritance in a Trust Share.
Purpose of Trust Shares
A Trust Share can be created for each beneficiary of your estate after an individual’s death, or the second death of a joint couple. The Trust Share is a legal entity that has its own tax identification number. A Trust Share prevents the trust beneficiary from commingling assets with a spouse directly because the assets are held in Trust Share. A Trust Share prevents an inheritance from being transmuted into a spouse’s community property, which could be lost in a subsequent family law matter. A Trust Share provides for marital harmony after the death of a loved one because it eliminates the conversation between a beneficiary and their spouse on whether they are going to deposit an inheritance into a joint account because the Trust Share doesn’t allow that as an option.
The Trust Share also provides flexibility with trust asset management. Typically, if a beneficiary is responsible with financial assets the creator of the Trust Share will allow them to be their own Trustee and manage the trust funds for their own benefit. Generally, the distribution standard for a Trust Share is for health, education, maintenance, and support. If a beneficiary is not responsible with financial asset a safeguard can be put in place with an Independent Trustee that can be a responsible family member or Professional Trustee. This creates checks and balances, so assets are not wasted with frivolous spending.
Trust Shares also allow you to set a minimum age of when a beneficiary such as a child or grandchild can serve as their own Trustee. We have found with experience that the age of 25 or 30 is much better than 21 given work experience and life experience.
Trust shares can even have a re-write power when it comes to looking at how assets will be passed to grandchildren. You could leave a Trust Share to your child and provide them with a re-write power known as a Limited Power of Appointment to decide how the assets from their Trust Share will be divided at their death among their heirs.
Consult with an Estate Planning Professional
While Estate planning can be complicated, it is essential in protecting yourself and your loved one’s financial future. Give us a call at 775-823-9455 to make a free consultation with an estate planning attorney and see how we can help protect your legacy and your family.
Authored by: Aaron Squires