Hold an inheritance in trust instead of giving it to a beneficiary outright. Had the brokerage account in the above scenario been held by a properly drafted trust of which your child was the beneficiary instead of being left to your child outright, the brokerage account would not be available to satisfy the legal claim. Because the trust, not your child, would have been the legal owner of the account, the brokerage account would have been left intact to continue to grow and provide for your child as a beneficiary of the trust.
Include specific provisions about behavior. When creating a trust, you can include specific provisions in your trust agreement that will either encourage or discourage certain kinds of behavior. For example, the trust could include a provision that limits distributions to a beneficiary if the beneficiary is issued more than three traffic tickets in a year.
List the things the trustee cannot pay for. For instance, if you know your beneficiary has a lead foot, you may want to specify that the trustee may not use trust funds to pay ticket fines, court costs, or attorney’s fees related to traffic offenses or increased automobile insurance premiums.
You should not leave your legacy unprotected from the occasional imprudent actions of your beneficiaries. Leaving an inheritance to your loved ones outright exposes that inheritance to the claims of sometimes unscrupulous creditors, but this unfortunate outcome can be avoided by using a well-drafted trust.