Should you leave your inheritance in your children’s names?

When it comes to organizing an inheritance, one of the main concerns that comes to mind is, “How can I organize my legacy to protect my heirs?” Many times, in an attempt to avoid certain legal situations, a significant mistake is made by transferring assets directly to the children.

Contrary to what many believe, doing this could bring significant problems for the heirs and would leave our legacy completely unprotected from lawsuits or divorces. Here’s why.

Common issues when transferring assets to children during one’s lifetime:

1. Possible Family Conflicts: The direct distribution of an inheritance to the children could generate tensions among the heirs if clear planning has not been done or if expectations have not been communicated adequately. These conflicts can affect family relationships.
2. Legal and Tax Liability: Depending on the country and tax laws, the direct transfer of assets to children can have legal implications. For example, it may generate additional taxes or unexpected financial burdens for both the heirs and the estate itself. For instance, if you acquired a property in the United States with a certain value, and when transferring it to one of your children, its value has increased, your child may now have to pay IRS taxes on the capital gain, which could, in many cases, lead to the loss of the house you lovingly left.
3. Risk of Creditors and Divorce: If the children face financial problems, debts, or a divorce, the assets you put in their name could be at risk as they are not shielded from these situations. Directly transferred assets could be subject to claims from creditors or become a legal dispute.

What option can you take to protect your legacy for future generations?

A Living Trust is a legal tool that allows a person to transfer the ownership of their assets to a trust and establish how these would be distributed in their absence. Essentially, this vehicle ensures that the assets pass to your heirs as and when you decide.

Here are some benefits of having a Living Trust compared to leaving an inheritance directly to the children:

• Avoids the Probate Process: By transferring assets to the trust, they do not go through the probate process, meaning the assets can be inherited by the designated beneficiaries immediately. This can be faster and less costly than a probate process.
• Privacy: Unlike a will, which becomes a public document after going through the probate process, a trust allows you to maintain the privacy of asset distribution details since it is not a public document.

Do you want to learn more about safeguarding your inheritance for your generational line? Schedule an appointment with me and my team today, and we will clarify all your doubts and guide you to make the best decision. Click here.