What You Can and Can’t Do with the Trust You Inherited
Can you stop your child from inheriting money, even if the trust says they should? In this estate planning episode, we walk through a real-life scenario where a mother is trying to protect her son from receiving a large inheritance at the wrong time. Along the way, we break down how estate planning tools like trusts actually work in real life, what trustees can and can’t do, and why you can’t simply “use up” a trust to avoid passing money on. We also introduce a powerful (and often overlooked) tool, a power of appointment, that might allow you to adjust what happens next, even when a trust is irrevocable. Because sometimes the plan is set… but not completely locked.
What You’ll Learn about Estate Planning
Why estate planning often includes trusts, even for families who don’t consider themselves wealthy
What a trustee does and what fiduciary duty really means
How the HEMS standard (health, education, maintenance, and support) shapes trust distributions in estate planning
Real-life examples of what trusts allow, and don’t allow, when it comes to distributions
Why you can’t “spend down” a trust to avoid passing assets in an estate plan
How estate planning balances the needs of current and future beneficiaries
What “irrevocable” means in estate planning, and where flexibility may still exist
What a power of appointment is and how it functions within an estate plan
The difference between a limited and general power of appointment in trusts
Why exercising a power of appointment requires proper legal execution
How estate planning can be adapted to better protect vulnerable beneficiaries
Resources & Links
Watch this episode on YouTube: https://youtu.be/YBOGjuhJkyA
Estate Plan Audit: Understand your existing estate planning documents and how they actually work in real life: https://deathreadiness.com/audit
Examples of powers of appointment:
Limited Power of Appointment. Upon the Child’s death, the Child shall have the power, exercisable only by specific reference in such Child's valid Last Will and Testament or Qualified Revocable Trust, to appoint the income and principal of the Child's trust as they exist upon my Child’s death, in whole or in part, to or for the benefit of one or more of the descendants of my father, John Smith, and one or more of the descendants of my spouse’s father, Robert Carpenter, in such amounts and proportions, and on such terms and conditions, either outright or in trust, as the Child may direct, provided, this power shall not be exercised in favor of the Child, the Child's creditors, the Child's estate, creditors of the Child's estate, or in any manner that would result in any economic benefit to the Child. To the extent the Child does not exercise this testamentary limited power of appointment, the remaining assets of the Child’s Trust shall be administered as provided, below, following the Child’s death.
General Power of Appointment. Upon the beneficiary’s death, the beneficiary shall have the power, only by specific reference to this power in the beneficiary’s valid Last Will and Testament, to appoint such portion or all of the assets otherwise distributable from such trust, to the beneficiary’s creditors, the creditors of the beneficiary’s estate, and the beneficiary’s estate. To the extent the beneficiary does not exercise this general power of appointment, the remaining assets of the trust shall be administered as provided, below, following the beneficiary’s death.
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Email: jill@deathreadiness.com
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