What You Need to Know About Beneficiary-Controlled Trusts
Would you like to provide your children or loved ones with an inheritance but protect them from the risks that may accompany a large windfall? If so, you can create a beneficiary-controlled trust in which the person you name as the trust’s primary beneficiary has rights, benefits, and control over the property held by the trust, but with important protections. In a beneficiary-controlled trust, you can name the primary beneficiary as the sole trustee, or if you name a co-trustee, the beneficiary can be given the authority to remove the co-trustee and select a successor co-trustee if they choose. In addition, a beneficiary-controlled trust may include a broad, non-general power of appointment that enables a beneficiary who is also trustee to limit the ability of other more remote beneficiaries to enjoy the property held by the trust.
What Are the Pros?
If you want to provide an inheritance to a mature child or loved one that you trust to make prudent financial decisions, a beneficiary-controlled controlled trust is a strategy that you should consider. Even beneficiaries who handle money wisely could encounter situations in which their money and property are vulnerable to creditors’ claims, divorce, lawsuits, or estate taxes: a beneficiary-controlled trust can protect the property held in the trust against those claims. Although you can include terms in the trust document that limit the degree of involvement and control you would like the beneficiary to have, a beneficiary-controlled trust can still enable the beneficiary to have a considerable amount of control over their inheritance and how it is used.
Beneficiary as sole trustee. Under most states’ laws, even if a beneficiary is the sole trustee, most creditors may not […]