Making Your Childrens’ Inheritance More Valuable to Them

“More valuable” doesn’t necessarily mean “more money.” How you “gift wrap” their inheritance can make a huge difference in their security, and on the impact the inheritance has on their lives. A study by a national insurance company revealed that most inheritances were spent within 18 months! At this point, you may be turned off because it sounds like “controlling them from the grave.” In reality, it’s making their inheritance more valuable. It can give your child more control and flexibility over their inheritance. As one author says, you may want their inheritance to be more than “dump, divide and dissipate.” The idea is to make the impact on their lives better than it would be with a traditional, direct inheritance.

“BDL ” Protection: When properly done, wrapping some or all of the inheritance in a trust insulates the trust assets from things such as a forced Bankruptcy caused by a major recession or bad personal choices. Also if it’s held in a trust, their inheritance isn’t on the “Divorce chopping block.” The largest proportion of the world’s Lawsuits are taking place in the USA. Assets in your child’s trust are safe from those legal claims too. In all of these examples, their inheritance is safe because the trust assets aren’t included in the child’s personal assets.

“Who’s In Charge?”: It’s commonly assumed that you’ll need a Trust Company to be in charge of your child’s trust. In many cases, this is a good idea, but it’s not required. You can name your child as the sole Trustee of their Trust. There also might be a Trust Company named as a Co-Trustee to serve with your child. You can even leave this decision up to your child. For example, when the sun is shining and all is well, your child serves as the only Trustee; but if there’s trouble, your child can bring in a professional Trustee for greater protection. Choosing the Trustee is a key decision, and our process helps walk you through that process.

Income Taxes: The children’s trusts we create can be flexible on how the trust income is taxed. This is valuable to your child, because trusts pay taxes at a higher rate than most individual taxpayers. Since we can’t know the future, we build your child’s trust so that he or she can decide at which level the trust income will be taxed. 

Their Personal Bank: Your child can use their trust as their own private bank. Instead of paying loan interest to a bank, they can borrow the money from their trust and make the payments (including interest) to their trust. It might be a new home, a vacation home, a loan to start or expand a business. In all these cases, your child has a financial edge they wouldn’t have with a traditional form of inheritance. 

Phase Out Inheritance And Estate Tax: Your child’s inheritance is subject to Pennsylvania inheritance tax (currently 4.5%). If the federal estate tax is modified next year, many inheritances will be taxed at the 40% federal rate! However, you can dramatically improve long-term family security and wealth when you leave their inheritance in the right kind of trust, because those “death taxes” are paid only once, and never again! Since the inheritance in a trust is legally not included in your child’s personal estate, there is no inheritance tax on the trust assets when that trust passes to the grandchildren. And then there’s no inheritance tax when that trust passes to your great-grandchildren, and so on as long as the trust is well invested and not drained of all its funds. In other words, by leaving their inheritance in a protective trust, you’re engaging in a powerful form of tax planning. 

Growing the Inheritance Without Extra Investment: An irrevocable trust doesn’t just safeguard assets; it also offers a framework for their growth. Assets within the trust can be invested and managed to increase their value over time. This growth strategy occurs within the trust’s protective structure, free from personal tax implications, potentially leading to a more substantial inheritance for your beneficiaries.

Avoiding Probate – The Ultimate Goal: With some or all of their inheritance in a trust, those assets never need to go through probate or even a trust settlement. Your child’s trust, if it still has assets, can either (a) end at the death of your child, with the proceeds passing to grandchildren without any inheritance tax or probate process, or (b) continue for the benefit of the grandchildren.  

Partner with Us in Crafting Your Legacy

If you’re contemplating the most effective way to secure a prosperous future for your children in Pennsylvania, consider starting a conversation with us. Highpoint Law Offices is dedicated to working with  you and exploring the advantages of irrevocable trusts and developing an estate plan that genuinely encapsulates your affection and aspirations for your family.

Schedule a consultation today by calling 215-997-9773. Together, we can create an estate plan that not only reflects your values but also ensures your loved ones are cared for in the years to come. At Highpoint Law Offices, your narrative, devotion, and dreams are deserving of this dedicated approach.

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HighPoint Law Offices PC

At HighPoint Law Offices we support individuals, families, and businesses of all backgrounds with estate planning services that address their unique wishes, goals, and challenges.

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