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Protecting inheritance from your heirs' creditors

People who have a will often think they have their estate plans under control. Many of them fail to think about how to maximize the inheritance they are giving their children. What happens if one of the children falls into deep debt for one reason or another? Most of the money parents give them could be available almost instantly to creditors.

Let's say the child that is in debt, is in that situation because of a chronic health problem, and a majority or all of the debt is medical debt. This is a common situation that many people don't think about when forming their wills. Having a trust and placing the inheritance in a trust might be beneficial for that heir. The trust could limit the access the child has to the money or assets included. Using a financial strategy, parents can help their children by still giving them an inheritance but limiting what is available to creditors.

On top of limiting the inheritance, a trust can also help children remain qualified for certain types of assistance such as Supplemental Security Income and Medicaid. Eligibility for these programs is provided based on current assets. Therefore, including the inheritance in a trust that is available to the child only at the discretion of the trustee could help them remain eligible for important benefits.

When situations like this arise, it is important to understand exactly how to word a trust and will to maximize the long-term benefit to an heir. Speaking with an experienced estate planning attorney can help make sure these documents are properly worded.

Source: Metro West Daily News, "Examining estate planning options," Christine Keane, Oct. 20, 2012

-Inheritance can be maximized using estate planning documents such as trusts. Please visit our trusts page to learn more.

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