Many Maryland residents intentionally delay their future heirs from inheriting. This trend is consistent with many other states around the country. This delay is accomplished through the use of trusts which require heirs to attain a certain age and even then many of the assets are distributed in increments over a period of time. There are three main reasons for delaying inheritances: (1) preservation of assets; (2) maintaining control; and (3) protecting assets from creditors and lawsuits.
Seasoned, mature adults understand that younger generations may not preserve a windfall as well as past generations. For this reason, many trust creators include terms aimed at asset preservation. These terms may include age delays or staggered distribution schedules.
Not only are trust beneficiaries required to wait longer for the inheritance, but they may also be told exactly how the money can and should be spent. Some trust provisions require the trustee to issue distributions only for education, the purchase of real property or other investments. Some may not be allowed to use principal for a period of time but only receive distributions on earned income from the trust assets. This gives trust creators a considerable amount of control over their assets well beyond the grave.
The third reason for delaying inheritances is to protect those trust assets from any creditors or lawsuits that the beneficiary may be subject to. Whether it is student loan debt, gambling debt or claims for personal injury lawsuits, the assets set aside in trust will not be available for pursuit by creditors, judgments and liens.
An asset protection attorney can discuss various tools and strategies like spendthrift trusts, setting up business entities and titling of assets as part of a comprehensive estate plan. The attorneys will also help to prevent some common gifting mistakes such as:
-Failing to Properly Name Beneficiaries and Keep Beneficiary Designations Up-to-Date: Life insurance policies, retirement accounts, payable on death accounts and annuities typically pass outside of probate by the use of contractual beneficiary designations. If these are not an accurate reflection of your overall estate planning goals when you pass away, some serious unintended consequences may occur.
- Failing to Calculate Appreciation: Assets such as stock or real property may see significant appreciation in value over time. Gifting these assets during your lifetime would require the recipient to pay capital gains taxes on the appreciated amount; however, keeping these assets in your estate to be passed to your heirs upon death may allow them to receive a step up in basis which minimizes or even eliminates the capital gains tax.
- Failing to Make Arrangements for Minors: You cannot gift or bequeath at death assets directly to a minor. The assets must either be in trust or subject to a guardian’s management. Make these arrangements in advance during estate planning to avoid unnecessary complications.
-Failing to Make Proper Arrangements for a Special Needs Heir: Gifting or bequeathing at death assets directly to a disabled person may place their government benefits in jeopardy. If you anticipate an heir may need to protect these types of benefits, you should make plans ahead of time for those assets to be transferred into a special needs trust with the disabled person as the beneficiary.
To get started on a comprehensive estate plan that includes provisions to delay inheritances and other asset protection strategies, contact the experienced attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
https://attendee.gotowebinar.com/register/2279637665535816717
https://attendee.gotowebinar.com/register/2455662880072996621
https://attendee.gotowebinar.com/register/937316486952016909
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