You love your romantic partner dearly, but you also know that marriages can end in divorce. As such, you're concerned that your child could have his or her inheritance compromised if you and your spouse part ways in the future.
Fortunately, there are multiple asset protection options that could protect your child's inheritance from your new spouse in divorce, from your child's spouse in divorce and even from creditors. One of them is commonly referred to as a "discretionary lifetime trust for minor beneficiaries."
What's a discretionary lifetime trust for minor beneficiaries?
If you pass away -- and you want your minor beneficiaries to receive the inheritance money and assets you've set aside for them -- there's always the risk that your current spouse could take control of the assets.
However, you can use a trust to set aside specific assets for the benefit of your children only. Your spouse will not be able to have access to these assets after you're gone, because, technically, you won't own them anymore. They will be the property of the trust, and for the sole benefit of the child or children you've named as beneficiaries.
Another advantage of a discretionary lifetime trust for minor beneficiaries is the fact that you will not need to place your complete trust in a conservator or guardian to manage these assets appropriately on behalf of your children. This would be necessary without a trust because minor children are not legally permitted to manage financial assets of their own, and a trusted conservator or guardian must do that for them.
On the other hand, with a discretionary lifetime trust for minor beneficiaries, a trustee -- often employed by a bank or financial institution -- will manage the assets in the trust until your child becomes of age. The trust will hold the assets until your child reaches a predetermined age when he or she will be old enough to handle the financial responsibility. Often this will happen when your child becomes anywhere from 25 to 30. Until this age, the trust can make regular distributions of money to the child. Alternatively, you can set up the trust to never release all of its funds, but instead to make regular distributions to your child for the rest of his or her life -- or until the trust exhausts itself.
Do you want to protect your children's inheritance with a trust?
The discretionary lifetime trust for minor beneficiaries will protect your child's assets from your new spouses until your child becomes of age. It will also protect your child's assets from your child's future spouses and creditors. There are many trust planning solutions as well. Be sure to understand all of the options available to you and your family before selecting the best trust to suit your needs.