WHAT IS AN INHERITOR’S TRUST?

Gabriel Katzner - April 22, 2019 - Trust Administration
inheritor's trust

Trusts can be an essential tool for estate planning purposes, and a trust can take any one of several different forms. The form you choose will vary based on the intentions and goals you have for your estate plan. The inheritor’s trust, for example, can be used to protect an inheritance if you’re expecting to receive one.

Why Use an Inheritor’s Trust?

This type of trust model can legally and financially protect a beneficiary’s inheritance, and as it’s set up, this trust will need to abide by a long list of tax and legal rules. Often, people who are receiving an inheritance would like to protect those assets from creditors, but there are a number of unethical and illegal ways of going about this. For example, in many states, it’s been declared illegal to set up something once called a “self-settled” trust, an irrevocable trust set up by the beneficiary that benefits him or herself at the expense of creditors and society. The rules preventing such actions make shielding inherited assets a bit complicated, but there are legitimate ways to do this, and the inheritor’s trust is one such method.

Inheritor’s Trust Explained

If the person who will leave you the intended inheritance chooses not to use a trust, you can establish an inheritor’s trust…but you can’t do this yourself. You will need to work together with your loved one to establish a trust that will become the recipient of the inheritance in your stead. This trust can include any number of stipulations and distribution schedules, and it may contain a spendthrift clause that will protect the assets against creditors. No matter what details and clauses the trust include, your loved one will need to sign off on the document as the creator, with you as the beneficiary.

Here are a few of the benefits of this trust model:

  • The inheritance can be excluded from your taxable estate, which can allow you and your family to sidestep estate taxes;
  • The trust can reduce the overall cost of the process since it prevents your loved one from needing to revise their existing plans;
  • Upon your death, the inheritance will be distributed outside of your probate estate. This can ensure privacy and can reduce attorneys fees and administration costs;
  • This trust protects the inheritance from creditors, lawsuits, and divorcing spouses;
  • Though you are not the grantor of the trust, the inheritance can possibly be controlled by you, as a trustee; and
  • You can decide how the assets will be distributed after your death if the trust allows.

An inheritor’s trust is a sophisticated estate planning tool that may be the best choice for anyone who expects to receive a large inheritance that may require asset and tax protection

Talk to an Estate Planning Professional

Mapping out an estate plan can seem like an intimidating process, but it’s also a necessary part of protecting your financial future and that of your loved ones. If you’re looking for ways to avoid estate and transfer taxes, the inheritor’s trust may be the right option for you. Contact us for more information.

You can schedule a call with us or reach us directly at 855.528.9637 to learn more about how best to plan today to protect those most important to you.


Gabriel Katzner

In 2002, Gabriel Katzner, the founding partner of Katzner Law Group received his Juris Doctorate with honors from the Fordham University School of Law. After spending the first 7 years of his legal career
practicing at Cahill Gordon & Reindel LLP, an international law firm based in New York, he went on to found his own firm.

Gabriel Katzner has a track record, along with a vast number of
outstanding public reviews across platforms, of working hard on behalf of individuals who need assistance with comprehensive
estate planning services. Finding a lawyer who is knowledgeable about revocable and irrevocable trust planning, guardianship for minor children, asset protection, trust administration and probate,
as well as Medi-Cal / Medicaid planning is extremely important.

Years of experience: More than 17 years
Location: San Diego, CA



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This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. Furthermore, it has received approval from attorney Gabriel Katzner, an experienced estate planning lawyer with over 17 years of legal expertise.

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