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Leaving a Heritage Not Just an Inheritance

Posted by Paul D. Woodard | Mar 24, 2017

After a lifetime of hard work and building a comfortable life for you and your family, there comes a time when you will have to plan for what happens after you pass away. As the old saying goes, when it comes to money, property, and belongings, you can't take it with you. However, rather than just passing money along to your children, you may be able to do the most good in the long-term by leaving a heritage and not just an inheritance.

Leaving a lump sum of money to children, grandchildren, relatives, or friends is not always in the beneficiary's best interest. A sudden influx of money does not come with the wisdom of how to use that money to their advantage. Short-term buys may be tempting, such as buying a brand new car, taking a trip, or going on a shopping spree. However, without an exercise of restraint, a couple of months later, the beneficiary's inheritance may be gone.

Even responsible individuals can fall victim to the problems associated with an inheritance. Relatives, significant others, and so-called friends can be very persuasive, or even aggressive, in making their claims on the inheritance. Wills and inheritances have been known to bring out the worst in some people, even tearing a family apart. Fortunately, proper estate planning can reduce conflict and help leave a lasting heritage that will benefit the family name for generations.

One of the simplest estate planning tools is the will. In this document, the testator is able to indicate how they want to distribute their assets upon death. However, there are a number of limitations to a will, including dealing with estate taxes, challenges to the will, and possibly being required to go through the probate court. Additionally, wills are not the best instrument for dealing with long-term plans and wishes.

Establishing a trust is an alternative estate planning tool. A trust has more flexibility than a will, providing that assets can be held for the benefit of other beneficiaries. Beneficiaries could include children, grandchildren, friends, or charities. In California, trusts can even be setup to take care of a beloved family pet. Trusts can also limit how assets can be used. For example, a trust could set aside money to pay for a grandchild's college costs and expenses so as to ensure their educational future is provided for.

In some cases, a trust also protects assets from creditors and estate taxes, ensuring the purpose of the trust is upheld for the specified benefit. For example, a heritage trust is an alternative method for distributing assets for the benefit of your children and provides advantages over outright distributions to your beneficiaries. In a heritage trust, assets are placed in trust for your child (or any other beneficiary) for the individual's lifetime. The child or beneficiary under the heritage trust can be named as the trustee and be responsible for all of the trust's administration and investment choices. However, a heritage trust must have a Distribution Trustee who has the sole authority to determine when and how distributions are to be made to the trust's beneficiaries. The heritage trust's beneficiaries will have no say as to whether distributions will be made to them. If the beneficiary should pass away, the assets could pass onto the beneficiary's children, without being subject to estate taxes.

Many people have charitable causes that are near and dear to their heart, causes that their children may not share. If supporting these causes is important after your death, then you may want to set aside a portion of your estate to give to a church or other charitable organization. This can be done through a bequest, a charitable gift annuity, a charitable trust, or even setting up a family foundation.

A last will and testament, living trust, and other estate planning instruments have benefits and drawbacks. In most cases, a combination of estate tools will provide the best options for an individual looking to provide a lasting future for their family, church, and charitable interests. Talk to your San Diego estate planning attorney about your options, and how you can leave behind a heritage and not just an inheritance.

If you have any questions about estate planning or making changes to your existing estate plan, the law firm of Butterfield Schechter LLP is here to help. We will answer all your questions and make sure your estate plan is up to date, and will best provide for your loved ones far into the future. Contact our office today with any questions on how we can help you and your family succeed.

About the Author

Paul D. Woodard

Paul Woodard practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Estate Planning.


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