When to Consider Discretionary Trusts for Your Estate Plan – Law Office of Sean D. Ethington

Leaving your hard earned assets outright to your children, grandchildren, or other loved ones after you die may seem like the simplest way to pass on your legacy. But what appears straightforward can sometimes expose those assets to unnecessary risk – from creditors, lawsuits, financial predators, divorcing spouses or the beneficiary’s own poor money management skills.

To provide greater protection and long term security, it may be wise to consider leaving assets in a discretionary sub-trust for a particular beneficiary. A discretionary sub-trust protects a beneficiary by placing inherited assets under the control of a named trustee, not the beneficiary. This estate planning tool gives your trustee the flexibility to manage and distribute funds according to your intentions, while shielding your beneficiaries from potential threats. It essentially gives your named trustee control over when and how your loved ones receive their inheritance and can be tailored to your specifications and for certain types of expenses. You can make the terms and time frames as limited or as broad as you desire.

Since your beneficiaries do not have an automatic right to the trust funds, those assets are usually protected from things like creditors, lawsuits, or divorce. This type of sub-trust can also make it less likely that someone will try to sue, and it gives the trustee more flexibility to handle any legal or financial challenges that may come up. Creating a protective “box” around the inherited assets shows the world that the inheritance is not the beneficiary’s property to do with as they please. Instead, only the trustee can reach inside the box and, based on your specific instructions, distribute funds out directly to or for the benefit of the beneficiary. When the beneficiary dies, what is left inside their box will pass to alternate beneficiaries of your choice. For example, you could have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary sub-trusts that will protect the inherited property and keep it in your family for decades to come.

If you are concerned that your children, grandchildren, or other family members do not have the skills required to manage and invest their inheritance, or will lose it in a lawsuit or divorce, consider utilizing a discretionary sub-trust into your estate plan.

For more information please contact the Law Office of Sean D. Ethington at (661)295-4604 or visit our website at www.ElderLawSite.com.

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