What is a Lifetime Beneficiary Trust?

by | Jan 20, 2023 | Trust Administration

Estate planning can be a complex process. While many people wrongly assume that they only need a will, there are other measures you can take to ensure the welfare of your family and have your assets distributed according to your wishes. As part of your estate planning process, you will want to consider opportunities to protect your assets for your beneficiaries. Ultimately, it is up to you to choose how you will leave your estate to your beneficiaries and how you will distribute your assets.

What is a Lifetime Beneficiary Trust?

A lifetime beneficiary trust can also be referred to as a lifetime asset protection trust. This trust can be created as a standalone entity or it can be created as part of your last will and testament. The term “beneficiary” is included because that is who will be the recipient of the trust. The person who will be managing and overseeing the trust is who is known as the trustee. 


Typically, lifetime beneficiary trusts are considered when there are children that are named as beneficiaries. A lifetime beneficiary trust can help to protect your children’s right to the assets in the trust. If you are planning on leaving your kids any type of funds or assets, you will want to safeguard those assets and give your children the best chance of growing those assets. 

What is a Beneficiary?

A beneficiary is a person or entity that you have legally named to receive benefits upon your passing. Who you choose to name as your beneficiary is completely up to you. You could name your spouse, your children, or even your pets. Beneficiaries are an important aspect of estate planning, as they help to provide you with guidance on what designations you would like to make. 

Choosing a Trustee

Distributions from a lifetime beneficiary trust are up to the trustee that you will have named. You may be concerned about your trustee’s ability to recognize when the beneficiary will need the distributions. While this puts some pressure on the trustee, there are some ways that you can mitigate these issues. Firstly, you will want to ensure that you are choosing a dedicated trustee that will be respectful of your wishes. You will not want to choose a trustee that is unorganized, has conflicting values, or does not feel confident taking on the role. Once you have chosen a trustee that you feel is capable of the role, write up guidelines to help assist them with distributing your trust. Providing your trustee with mock scenarios might also help them make decisions regarding real situations after your passing. 


Benefits of a Lifetime Beneficiary Trust 


Assets are Safeguarded

If the beneficiary is ever sued or they go through a divorce, they will not have to worry about their assets. A creditor or an ex-spouse will not have access to the funds in a lifetime beneficiary trust. 


Protection in Case of Incapacitation

A lifetime beneficiary trust will be run by a trustee, not the beneficiary. So, if the beneficiary becomes incapacitated for any reason, the trust will still be able to operate. 


Distributions at Any Time

Whenever a beneficiary needs funds from a lifetime beneficiary trust, they can have access. So, if the beneficiary needs health or education support, they may be able to get a distribution. This would be up to the trustee’s discretion. 


Distributions Aren’t in One Lump Sum

The beneficiaries of a lifetime beneficiary trust will not get distributed one lump sum. While some may think this is a disadvantage, this is actually one of the greatest benefits of a lifetime beneficiary trust. Not distributing assets in one lump sum helps to ensure that the beneficiaries do not blow through their entire inheritance at once. 


Providing an Educational Opportunity

Lifetime beneficiary trusts can provide a child with hands-on experience with managing finances. They may engage in more financial situations, such as investing and donating to charity. The trustee that you have named will help the beneficiary and give them support. You may also name the child as a co-trustee once they reach a certain age. This will allow the child to manage their assets under supervision. Later on in life, you can also choose to name the child the sole trustee. 


Are Lifetime Beneficiary Trusts Only for The Wealthy?

Contrary to popular belief, a lifetime beneficiary trust can be valuable to nearly anyone and wealth does not play a factor. Typically, lifetime beneficiary trusts are most beneficial for families that have lived modestly and want to help guide their future generations. Studies have shown that many individuals that are beneficiaries of a trust will blow through their inheritance rather quickly. This could be due to spending a significant amount of their inheritance or due to poor investments. 

Is a Lifetime Beneficiary Trust Right for You?

When it comes to estate planning, there are many different trust options that are available to you. It is important that when you are taking on estate planning initiatives, that you are assessing your own individual needs. Determining what is right for you may depend on your own unique life situations, as well as your values and goals for the future generations of your family. In essence, no two estate plans are the same. If you are considering a lifetime beneficiary trust, you will want to consult an estate planning attorney. 

Schedule a Consultation with a Professional Estate Planning Attorney

There are many different types of trusts that an individual can choose from. Knowing which is right for you and your needs, can be a challenge. This can cause the process to become overwhelming. However, understanding your options and just what they entail will allow you to make informed decisions regarding your final wishes. At Galanti & Copenhaver, Inc., our team is dedicated to providing an individualized experience to assess your own unique needs. Our experienced team is ready to answer any questions and address any concerns you may have about the estate planning process. Schedule an initial consultation today to speak with a member of our team!