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Inheritance Trusts at a Glance

Inheritance Trusts at a Glance

Inheritance trusts, also known as testamentary trusts, are an effective estate planning tool that can help individuals safeguard their assets and pass them on to their intended beneficiaries. Unlike living trusts, which are created during an individual’s lifetime, inheritance trusts are created through a will and come into existence after the individual’s death. In this article, we’ll provide an overview of inheritance trusts, their benefits, and their limitations.

What is an Inheritance Trust?

An inheritance trust is a type of trust that is established through an individual’s will and goes into effect when the person dies. The trust is created to hold the assets of the deceased person and distribute them to their designated beneficiaries according to the terms specified in the will.

The trust can be set up to govern the distribution of assets to beneficiaries immediately upon the person’s death or it can be a long-term trust that distributes assets over a period of time. Inheritance trusts can be designed to fit the unique needs of the family and the individual’s estate.

Types of Inheritance Trusts

There are two main types of inheritance trusts that individuals can establish through their wills: the simple trust and the complex trust.

Simple trust: A simple trust is a trust that makes distributions of income or principal to the beneficiaries. A simple trust can distribute assets to one beneficiary or multiple beneficiaries at one time or over a period of time.

Complex trust: A complex trust is a trust that has more than one type of beneficiary. A complex trust can distribute assets to one or more beneficiaries at different times. Complex trusts provide more flexibility to the testator, but it also makes them more difficult to establish.

Benefits of Inheritance Trusts

Inheritance trusts have numerous benefits for individuals who are seeking to protect their assets and provide for their beneficiaries. The following are a few of the most important benefits of inheritance trusts:

1. Asset protection

One of the primary benefits of inheritance trusts is that they can provide asset protection for the beneficiary. An inheritance trust can be set up to protect the assets from creditors and other legal actions. For example, if the beneficiary of the trust is facing a lawsuit or other legal action, the assets held in the trust can be protected from being seized or taken as part of a legal settlement.

2. Control over distribution of assets

Another benefit of inheritance trusts is that they provide the testator with control over the distribution of their assets. Instead of designating the beneficiary to receive a lump sum payment of the estate, the inheritance trust can distribute the assets over a period of time. This can help ensure that the beneficiary does not squander the assets in a short amount of time.

3. Tax benefits

Inheritance trusts can also provide tax benefits to the testator and the beneficiaries. The assets held in an inheritance trust can be excluded from the beneficiary’s taxable income and estate taxes. Additionally, establishing an inheritance trust can help reduce the overall estate tax liability.

4. Reduced probate costs and delays

Inheritance trusts can help reduce the costs and delays associated with probate. Probate is the legal process through which a court validates a will and administers the estate of the deceased person. By establishing an inheritance trust, the assets can be distributed through the trust, avoiding the need for probate and potentially reducing the costs associated with it.

Limitations of Inheritance Trusts

While inheritance trusts offer numerous benefits, they also have some limitations that should be considered before establishing one.

1. Time-consuming and complex

Inheritance trusts are complex legal documents that can take time to establish, particularly for complex trusts. Additionally, the establishment of an inheritance trust may require more legal work and consulting fees than other estate planning tools.

2. Limited flexibility

Inheritance trusts can be rigid in terms of their distribution requirements. Once the trust is established, any changes to the distribution of assets will require amending the trust document, which can be a complicated and costly process.

3. Unable to be altered after the testator’s death

Once the testator passes away, the provisions of the trust become irrevocable. If the testator creates an inheritance trust that prohibits the beneficiary from accessing the assets until a later date, the beneficiary cannot modify the terms of the trust. This lack of flexibility might not work for everyone.


Inheritance trusts are a valuable estate planning tool that allows individuals to provide for their beneficiaries and protect their assets. However, inheritance trusts are complex legal documents that require careful consideration and may come with some limitations. As with any estate planning tool, individuals should seek the advice of an experienced estate planning attorney to ensure their estate plan meets their unique needs and goals. By taking the time to carefully consider their options, individuals can create an estate plan that provides peace of mind and protects the legacy they leave behind.

An inheritance trust is a type of trust that is made for the purpose of further protecting the assets that are to be delegated as part of a trust by the recipient the assets. An inheritance trust is meant to protect the assets from creditors and from being subject to affecting estate taxes. However, there are various inheritance trust rules in place, which vary from state to state.

An inheritance trust may be an option for some if an inheritance is expected. this will allow for protect the assets from creditors and allow the recipient access to those assets as necessary. Inheritance trust rules also allow for the assets to be removed from a person’s estate so they will not be subject to federal estate taxes upon the recipient’s death. An inheritance trust is received in the circumstance that a trust has been established by another person, such as a parent or grandparent.