There are many things that can go wrong with an outright distribution:

  1. Judgment creditor can seize a beneficiary’s inheritance

  2. Bankruptcy court can seize a beneficiary’s inheritance

  3. An incapacitated beneficiary can squander an inheritance before anyone can step in to help him.

  4. A divorce court can award some of the beneficiary’s inheritance to an ex-spouse

  5. If the beneficiary doesn’t plan properly himself, his spouse’s family can receive your money

A lifetime discretionary trust, set up either during your life or through a Will, can mitigate against some of these risks. Some of the benefits of a lifetime discretionary trust include:

  1. Protection from beneficiary’s liabilities

  2. Protection from beneficiary’s divorce

  3. Protection during beneficiary’s incapacity

  4. Protection from beneficiary’s profligacy 

Talk to an estate planning attorney to see if setting up a lifetime discretionary trust may be beneficial for your family.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.