In my last article, I explained how a living revocable trust is established and managed. In simplest terms, it is a legal document that provides for the management of property upon death or disability. The main benefit of a living revocable trust is that it allows the transfer of property without a probate court administration. Not everyone absolutely needs a living revocable trust to avoid probate. However, there are some circumstances when a living revocable trust is an indispensable tool. Upon the death of a grantor, the party who established the trust, a living revocable trust become irrevocable, and its terms can protect a beneficiary’s inheritance from many situations.

Underaged beneficiaries: In some cases, intended beneficiaries have not reached 18 years of age, the age of majority in Ohio. It is not advisable for minors to hold title to property and other assets without the oversight of a trusted adult. Indeed, many argue that young adults in their twenties do not have the maturity to manage assets responsibility. A living revocable trust can direct a trustee to hold assets in a separate share trust for a young beneficiary until he/she reaches a desired age.  Even before the beneficiary reaches that stated age, the trustee can use the trust assets for the beneficiary’s education, the purchase of a residence, the purchase or management of a business, or for any other extraordinary opportunity deemed by the Trustee to be in the best interests of the beneficiary.

Beneficiaries who don’t get along: It is not unusual for conflict to affect family relationships. Sometimes siblings are unable to work effectively together to sell a decedent’s assets. While transfer on death designations are useful to transfer real property to beneficiaries outside of probate, the title to the real property is then held by the beneficiaries together. They must then decide unanimously whether to sell, keep, or divide the real property. If they are unable to come to an agreement, the beneficiaries must resort to court litigation. A revocable living trust, however, vests the power in a trustee to sell, manage, or divide the real property for the benefit of the beneficiaries and pursuant to the exact terms of the trust. This avoids fighting and the cost of litigation.

Creditor/debt problems:  When a beneficiary inherits money, real property, or other assets, they are fair game to the beneficiary’s creditors who are eager to attach the inherited assets to satisfy debts and judgments. A living revocable trust can direct a trustee to hold assets for that beneficiary in a separate trust with a spendthrift provision. That way, creditors cannot demand the trustee release the assets to satisfy the beneficiary’s debt. However, the trustee can pay for the beneficiary’s ongoing bills and expenses directly, in the trustee’s sole discretion.  

Alcohol or substance abuse:  There may be a risk that a beneficiary may use inherited assets improperly, or even illegally, to fuel an addiction. A living revocable trust can direct a trustee to hold assets for a beneficiary who is struggling with these issues and pay for the beneficiary’s legitimate expenses directly.

Domestic troubles: A beneficiary may be the party to a troubled marriage or in the middle of a bad divorce. A living revocable trust can direct a trustee to hold assets for a beneficiary so they do not become marital property or subject to the claims of the beneficiary’s estranged spouse.

When establishing a trust, it is important to consult with a trusted attorney to protect a beneficiary’s inheritance. Otherwise, trust assets could be lost to disputes, creditors, illegal activities, or costly litigation. Laribee Law, LLC is here to assist you.

Michael Laribee is a partner in the Medina law firm of Laribee Law, LLP. This article is intended to provide general information about the law. It is not intended to give legal advice. Readers are urged to seek advice from an attorney regarding their specific issues and rights.