Inheritance Trusts

Question: My parents will only do basic wills to each other and then to myself and other siblings when my second parent dies. I have heard that there is a much more advantageous way for me to receive my inheritance from my parents.  Is there anything I can do to more wisely protect my inheritance?

Answer: Yes.  You could create what is often referred to as an INHERITANCE TRUST to receive the funds that your parents leave to you after they have both died.  However, your parents would have to change their wills to make your trust the beneficiary of your share of their estate instead of making your share payable to you individually.  The very important benefits that an inheritance trust offers is that it  creates a very high wall around the inheritance to protect it from:  1.)  Claims from a creditor; and   2.)  Claims from a divorcing spouse.

As an example, if you were to go into a business venture and personally sign a note at a bank, and the business didn’t succeed, and the bank looked to you for payment of the note, the bank would not be able to force sums to be paid out of the inheritance trust as a result of any amount you might owe the bank, nor, for that matter, could any other creditor.  While we all hope there will never be a divorcing spouse, let alone one  who will make a claim against you beyond your ability to pay, it is a special and valuable layer of security to protect an inheritance against possible claims made by a future divorcing spouse. This can be achieved if the inheritance is received directly from your parents into the inheritance trust. If your parents left the money directly to you, and you then attempted to place it into the inheritance trust, Texas law would not provide the benefits of protection from claims of divorcing spouses or creditors as discussed above.

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Category : Estate Planning &Trust Litigation

One Comment → “Inheritance Trusts”

  1. Bill Schiefen
    5 years ago

    Would it be possible to create a trust that would contain funds received from both inheritance, insurance, as well as any other independent sources?

    Thanks, Bill