Receiving Your Inheritance in Trust

Posted on June 17, 2009 by Bryan Howard

If one of your parents is alive, you should consider asking your parent to give you any inheritance that you will receive in a beneficiary-controlled trust.

A properly designed beneficiary-controlled trust can provide protection from creditors, including divorced spouses, and from estate taxes upon your death. When discussing this matter with your parents, blame your attorney for raising the issue.

At my suggestion, one of my clients persuaded his mother to amend her Will to leave his future inheritance in a trust controlled by my client. The amendment did not affect the bequests to my client’s siblings. His mother died last year and the trust has been funded with approximately $800,000. My client is currently distributing cash from the trust to his son, who recently lost his job. This is not a taxable gift by my client. My client's son is in a low income tax bracket, which significantly reduces the income taxes payable with respect to the trust’s income.

The ability to divert income to a child without losing control of the assets is one of the many benefits from receiving your inheritance in a trust.

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Amending Your Will After You Become Incapacitated

Posted on June 10, 2009 by Bryan Howard

For sound policy reasons, your Will cannot be changed by your conservator or attorney-in-fact after you become incapacitated. The downside of this rule is that it is not possible to make sensible adjustments to changed circumstances, such as changes in the tax laws.

Fortunately, a recent Tennessee law (TCA Section 35-15-602(e)) recognizes a method for you to authorize changes to the disposition of your estate after your become incapacitated. Two years ago, I prepared a revocable trust agreement and a general power of attorney for one of my clients that authorize a family friend to make changes with certain parameters.

Even though my client is now incapacitated, I am preparing an amendment to her revocable trust that will change a $1,000,000 bequest to her daughter to a $2,000,000 charitable lead trust. Estate tax savings from the charitable deduction accounts for the different amounts. For 20 years after my client dies, the charitable lead trust will make payments to charity that the daughter and her children would have otherwise made from their own assets.

The amendment power is a very powerful tool. This power needs to be drafted carefully and should be given to someone whom you really trust.

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