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Where to put inheritance?

Home Estate Planning Where to put inheritance?

  • Avatar emzajano 
    Participant
    Status: Physician
    Posts: 1
    Joined: 09/15/2017

    My parents are going through estate planning. They want to know if I want my portion of the inheritance in a trust, to protect it from creditors (potential law suit is the only foreseeable concern, knock on wood there too). I do not know how to answer that. From what I can tell, these are the pros and cons.

    Pros: those funds are protected from creditors, would not be accessed in a terrible situation like a law suit. Is there benefit from a tax standpoint to take this money in pieces each year when needed, rather than one large chunk of change?

    Cons: need to go to the trust for money when needed/wanted. Need to pay someone to manage the trust every year – could be quite expensive over time

    Is this worth the hassle?

    #84425 Reply
    Avatar Steven Podnos MD CFP 
    Participant
    Status: Physician, Financial Advisor
    Posts: 140
    Joined: 09/21/2017

    If you are a physician and are to inherit substantial assets, then inheriting in trust is a great idea.  It provides excellent asset protection as long as there is at least one trustee that is not you (the beneficiary).  You can pick a friendly trustee and have the right to substitute other friendly trustees in order to get distributions any time you want.  But if a malpractice creditor (or other) is at the horizon, your independent trustee (or co trustee) can refuse to dispense funds.  I’d want the trustee(s) to have complete discretion on when money comes out with no mandatory distributions.

     

    As to cost, if you have a family member or friend that can be the friendly trustee, no cost there.

    #84432 Reply
    Avatar kuma1212 
    Participant
    Status: Physician
    Posts: 27
    Joined: 09/17/2017

    I think it would help to have a little more background.  Are you single/married/kids/age etc.

    I am currently creating my own trust/estate planning for my kids.  My mother has a trust and any assets that may pass down to me, I plan on placing into my trust once created.  Depending on your situation and what is stipulated in the trust, you may not need to pay for a money manager for the trust.

     

    #84433 Reply
    Liked by Craigy
    Avatar Steven Podnos MD CFP 
    Participant
    Status: Physician, Financial Advisor
    Posts: 140
    Joined: 09/21/2017

    Dear kuma1212,  If assets are paid out to you from your mother’s trust, you won’t be able to protect them from creditors.  If you mean you will be putting the money in your Living Trust-that provides no asset protection.  If you want asset protection, consider what I wrote before-leaving the assets in your mother’s trust for your benefit, but with friendly trustees.

    #84436 Reply
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 1961
    Joined: 09/16/2016

    Are you solvent?  Do you plan to stay that way?  Are you a spendthrift?  Will you turn into one?  Are you married to a spendthrift?  Do you plan to get divorced?

    Would you rather I gave you a $100 bill, or would you rather that I named you the beneficiary of a $100 bill, to be paid out as the trustee sees fit, who takes a $2 per year fee, etc?

    😉

    LEVEL 1 WCI FORUM MEMBER.

    #84441 Reply
    Liked by Hank
    Avatar FIREshrink 
    Participant
    Status: Physician
    Posts: 953
    Joined: 01/11/2017

    Depends on the amount in question. I can’t imagine a physician wanting substantial assets dumped into her estate, thus subject to estate taxes, lawsuits, other creditors and even divorce. I am grateful when my parents died the majority of their estate was left in trust.

    #84442 Reply
    Avatar kuma1212 
    Participant
    Status: Physician
    Posts: 27
    Joined: 09/17/2017

    Steven, Thanks for the reply!  I just started the process so am trying to learn and understand this.  I was thinking of the trust as more for passing down assets to my heirs, and not from an asset protection standpoint.  But now that you mention this, I should consider this too.

    #84450 Reply

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