Protect Your Beneficiary's Inheritance

By, Jeffery Voudrie, CFP - An inheritance is the precious fruit of years of labor. It is an expression of love. Nowadays, more than ever, an inheritance is something that should be protected. All too often, inheritances are squandered or lost because of a lack of planning by those giving it. Read on to discover how to easily change that.

There are many dangers that can threaten the inheritance you leave your children or heirs. The number one concern of many of the people that I talk with is that an inheritance will be lost if the beneficiary gets divorced. In today’s society, the probability of that occurring is greater than ever before, regardless of religious beliefs. They dread the thought of their money being lost to a departing spouse instead of remaining with their child or grandchildren.

An often overlooked danger that many people fail to recognize is the threat of loss from lawsuits or creditor’s claims. We live in a very litigious society. If the person receiving your estate is in even a simple car wreck, the chances are high that they’ll be sued. Heaven forbid someone should die in the accident. The estate you left is like a pot of gold just waiting to be discovered by predatory lawyers.

Your heir could get into financial difficulty. A business could fail. Whether through mismanagement or unforeseen circumstances, if your heir gets into financial difficulty, creditors will go after the money inherited.

Receiving your inheritance could also cause your heir to lose benefits they would otherwise be entitled to. For instance, if disabled and receiving government benefits, receiving an inheritance could cause them to lose those benefits. There are times when the government would claim those funds in repayment for benefits previously paid. A college student could lose scholarships that are based on financial need, as well.

It’s important to take a long-term perspective on the estate you leave behind. If handled properly, even a modest inheritance can be a legacy that will provide financial security to your loved ones for generations. Therefore, it makes sense to not have to pay Uncle Sam estate taxes every time the money passes from one generation to the next.

The person receiving your inheritance may already be financially successful. If their estate isn’t already large enough to trigger estate taxes when they die, the receipt of an inheritance could put them over the limit. The result is as much as 50% of the money you leave behind could go to Uncle Sam when your child passes it on to your grandchildren and when your grandchildren pass it on to your great-grandchildren.

As you can see, there are many reasons that it’s important to protect an inheritance. And it shouldn’t be the child’s responsibility to do so. Once they receive it, there are few options available to them to protect it. Instead, the parents need to take responsibility to protect what they leave behind.

Traditional methods of protecting the estate you leave behind meant your heirs would lose control. An outsider would be responsible for how the money was invested and would control the distributions to your heir. These methods were cumbersome and expensive–which is why most people didn’t use them and instead distributed their estate outright.

The solution to these problems is a new tool called a Beneficiary Trust. This trust allows the estate you leave behind to be protected from loss due to divorce, the claims of creditors or even bankruptcy. It allows your wealth to be passed from generation to generation without losing up to 50% of it in taxes each time it is transferred. It won’t affect eligibility for government benefits or scholarships.

Best of all, your heir retains full control. The heir makes all the financial and investment decisions. Virtually anything that can be accomplished by the heir without this trust can be done with it. And the costs involved are small enough that it should be used even for small estates.

A Beneficiary Trust is an extremely flexible vehicle, yet isn’t understood by many attorneys. If you have questions about how a Beneficiary Trust can be used in your situation, feel free to give me a call or send me an email.


Mr. Voudrie is a Certified Financial Planner, nationally syndicated columnist and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. For more information call 1-877-827-1463. “Guarding Your Wealth” is a nationally syndicated weekly personal finance column written by Jeffrey D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group, a private wealth management firm that employs sophisticated proprietary strategies designed to protect and grow its clients' investments.

You may like these other stories...

By Michael Alter Participating in social media is rapidly becoming a necessity for businesses. In 2013, we're seeing discussions among business owners shifting away from why to participate to where and how to get...
By Jeff Davidson You've had those days: nothing is working and your frustration is mounting. Resilient individuals, however, manage to find their way back on track. They apply ingenuity to daily tasks, long-term...
By Curtis C. Verschoor, CMACourt cases and events involving whistleblowing are appearing in news headlines with greater frequency, and awareness about the importance of speaking up, when witnessing wrongdoing continues to...

Already a member? log in here.

Upcoming CPE Webinars

Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 22This webinar will include discussions of important issues in AU-C 800, Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.