9. Because you don’t want your child’s inheritance lost to creditors, lawsuits or divorce.
Most people work hard for what they have and desire for their legacy, whatever size it is, to act as a safety net for their children. Unfortunately, without proper estate planning, your legacy can be lost to your child’s creditors, to frivolous lawsuits or to a divorcing spouse. However, through effective estate planning, you can provide a layer of asset protection to your child’s inheritance that your child cannot easily or inexpensively create for himself. Even if your child is financially mature and manages money well, the asset protection you can give him or her is invaluable. We generally create this asset protection through placing your child’s inheritance in a well-designed Children’s Trust rather than making an outright distribution to him or her. The trust can be customized to make distributions to your child under a variety of circumstances. It can also be designed to terminate at a certain age or it can last for your child’s lifetime, providing a lifetime of asset protection to the property remaining in the trust. The asset protection it provides is not absolute and may not be effective against all creditors or in all situations, but it will be effective against many. Providing asset protection to children is becoming a more and more popular estate planning goal.
