Whether your children are still young or they already have kids of their own, leaving them a meaningful legacy is probably important to you. You want to know they will have comfort after you pass and also something to remind them of you.
Perhaps there are specific, valuable pieces of property you want to give them. Maybe you just hope to set them up with the overall value of your estate. No matter what your priorities or wishes are, you don’t want people other than your children using up those assets before your children receive their inheritance.
Who might be able to claim part of the inheritance other than your child?
There are a surprisingly large number of parties who could have a claim to property from your estate. If you die with debts, your creditors can claim most of the property you owned before anything gets distributed to your family.
If your children are older and get divorced, their former spouses might try to claim part of the inheritance in a divorce. If you divorce while your children are still minors, your ex could waste the inheritance before your children become adults. Even Medicaid could claim your personal property or the house that you live in after you die.
Thankfully, there is a straightforward estate planning method that can help prevent third parties from claiming any of the inheritance that you want to leave to your children.
Trusts can protect your legacy from most outside claims
Using the assets that you want your children to inherit to fund a trust is perhaps the simplest solution to preventing third-party claims against specific assets in your estate. As you are not the owner of the assets used to fund the trust, your creditors and Medicaid recovery programs will have a hard time making claims against that property.
Trusts can also prevent your ex-spouse or another guardian who cares for your children from using up their inheritance before they become adults. A trust can even protect your child’s inheritance from claims by their spouse in the future by preventing the commingling of inherited assets.
Recognizing the various ways other people could diminish the legacy you want to leave for your children can help you make better decisions when planning your estate.