Today we have a guest post fromJosiah Hass of JTH Legal, an Oklahoma City firm working with individuals, families and small businesses:
Revocable trusts are incredibly flexible and can be specifically designed to address numerous concerns related to how children receive their inheritance. Whether your child is 3 or 33, you can utilize your trust to protect assets and benefit your family in several ways:
Creditor Protection: Assets held in a properly structured trust are generally not considered the child's property, even after you pass away. This means they are protected from the child's creditors, lawsuits, or bankruptcy. If a child faces financial difficulties, the trust assets should remain safeguarded.
Divorce Protection: In the event of a child's divorce, assets held in a trust for their benefit are typically not considered marital property subject to division. This can prevent an inheritance from being split with a former spouse.
Controlled Distribution: Parents can set specific conditions for when and how their children can access the trust assets. This is especially useful for minor children who are not yet mature enough to manage a large inheritance. Distributions can be staggered over time, tied to specific milestones (like graduating college or reaching a certain age), or limited to specific uses (e.g., education, medical expenses, or a down payment on a house). This prevents a child from squandering a lump sum inheritance.
No Direct Cash: If a child has substance abuse issues, or develops them in the future, the trust can also explicitly prohibit the trustee from making direct cash distributions to the child. Instead, the trustee pays third parties directly for approved expenses (e.g., rent, utilities, food, medical bills, treatment programs). This prevents the child from using the inheritance to fund their addiction, incentivizes them towards recovery, and provides a stable foundation for the child.
Protection for Special Needs Children: A Special Needs Trust (SNT) can be established to provide for a child with disabilities without jeopardizing their eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). The trust assets supplement, rather than replace, these essential public benefits.
Avoiding Probate: Assets held in a funded trust bypass the probate process upon the trust creator’s death, which can save time, money, and provide a more private transfer of assets to the children.
In essence, a trust creates a legal "container" for assets, with a designated trustee managing those assets according to the trust creator’s specific instructions, all for the benefit of the children (or other beneficiaries). This separation of ownership and control is key to the asset protection benefits trusts offer.
This summary provides a concise overview of important considerations for creating revocable trusts, and is not to be construed as legal advice for your specific situation. Please contact us if you have questions or need assistance.
Josiah Hass is a business attorney located in Edmond, Oklahoma and services clients throughout Oklahoma. Josiah’s practice has focused on business and estate transactions and litigation for the last 12 years.
You can contact Josiah here to schedule a consultation.
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