As you create an estate plan and put your financial affairs in order, your spouse and children are usually the people you are most concerned about providing for. How your children will receive their inheritance is a major concern in estate planning. Will you leave their inheritance to them outright or in trust to be distributed over time so that they have protection from creditors and life events? What tax consequences are there to how distributions are taken?
When you’re creating an estate plan that includes protection for your children’s inheritance, it’s important that you communicate the plan with them once they are mature enough to discuss it. It is also important that you explain how the plan offers them protection and the tax consequences associated with different decisions they may make.
Protection of Inheritance Using Trusts
The use of trusts to hold your children’s inheritance can provide protection from creditors as well as protection from possible divorce settlements or settlements from other lawsuits. You work hard to earn your income and save for retirement. You can create your estate plan to provide protection from your children’s creditors and to protect their inheritance from a future broken marriage. To do so, consider leaving your children’s inheritance in trusts that incorporate spendthrift provisions that prohibit the trustee from making distributions to creditors and in settlement of lawsuits. If you do so, it is important to discuss your plan with your children so they understand how the trust works and what they need to do to use the provisions for their protection.
Tax Consequences Associated with Distributions
It is also important that you discuss the tax consequences of your estate plan with your children. For instance, if your children can inherit your retirement accounts and take distributions over their lifetime, the tax rate applied to the distributions may be lower than if they take a lump sum distribution following your death. There may be time restrictions on how quickly your children need to elect to roll the accounts into inherited IRA’s to avoid lump sum distributions.
If you pass away without establishing a will or trust, Georgia’s intestacy statutes will determine the distribution of your estate. The use of trusts are a smart option to consider when planning your estate. It allows your children to receive the inheritance you want them to have while protecting your children’s financial future. When you’re ready to set up a trust that benefits your children immediately after your death, call Grissom Law, LLC. We have the skills, experience, and expertise to establish the trust you and your children can depend on.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.