When leaving property to your children, you can choose exactly how you want it to go to them. You can leave property outright, in trust until the beneficiary reaches a certain age or achieves a certain goal. Or the property can be held in trust for life. These trust provisions can be included in your living trust to take effect upon your death.

However, you also have the option of creating a “Heritage Trust” (also known as a Lifetime Inheritance Protection Trust) for each of your children. A Heritage Trust is a trust you create today, naming your child as trustee (or someone else) and beneficiary upon your death. These trusts, if properly drafted, can:

• (1) protect your child’s inheritance from his or her spouse in the event of a divorce;

• (2) protect your child’s inheritance from his or her creditors in the event of a financial hardship;

• (3) on your child’s death, direct the unused assets to your grandchildren instead of in-laws or others

Heritage trusts provide that, during your children’s lifetimes, they have access to the income and the principal of their trusts – so that you’re not giving them a “gift with strings attached” or “ruling from the grave.” But when your child dies, you would like the unused portion of their inheritance to go to your grandchildren. If the grandchildren are under age 30, the funds are held in trust for them until then, with the Trustee (usually one of your other children) using so much of the assets as may be needed for their health, education, maintenance or support. If one of your children dies without leaving children of their own, then the trust funds go to their surviving brothers and sisters.

Having a Heritage Trust also makes it easier for your child to keep assets separate from their spouse when these assets are left to them in trust. Upon your death, all of your assets are re-titled directly from your estate to your children’s trusts (your children should consult with an attorney to help them with re-titling assets). This allows your child to tell their spouse “my parents left this money to me in trust: compared to their receiving the inheritance “in hand” and having to take active steps to keep those assets separate from their spouse.

The laws of California prohibit the creation of self-settled asset protection trusts. So, your beneficiaries will not be able to protect these assets themselves without your help. But, you have the ability to give them the gift of asset protection by including Heritage Trusts in your estate plan. If you are going to leave assets to them anyway, why not use a small portion of the inheritance to do some good planning for them today? Not only will they greatly appreciate what you’ve done for them, it will get them on the right track of planning for themselves and their families.

About Brenda Geiger, J.D.

Brenda is a Trusts & Estates Attorney with her primary office located in Carlsbad, California (she also has satellite offices in Costa Mesa and La Jolla). Brenda graduated from the University of San Diego School of Law where she served as an Editor on the San Diego International Law Journal and published a scholarly article in the Law Journal. Brenda is also a published author of many articles and 3 books on estate planning. The most recent book was released in June of 2009 entitled “Safeguarding the Nest” available at www.SafeguardTheNest.com. Her passion is helping families protect their children and keeping families out of the court process at incapacity and death. On a more personal note, Brenda is married to Len, the CEO of the San Diego based web hosting company WebIntellects, Inc. and they have two small children, Lenny and Taylor. They also have two dogs, Starsky and Semper (their lovable German Shepherds).

For more free articles and reports, go to www.SmartMomLawyer.com. To request a special planning meeting with Brenda, call (760) 448-2220 or email us at info@SmartMomLawyer.com.