Can my son’s creditors take his inheritance?
What will happen to my property when my children inherit? After death, one’s property will be controlled for awhile by a person’s estate or living trust. But eventually ownership will be transferred to the heirs. Will their creditors be waiting?
It took me a lifetime to accumulate what I have. Will my living trust protect my spendthrift son from his creditors? Trusts contain a Spendthrift Clause to protect a beneficiary from creditors as long as the inheritance remains in the trust. To make sure that your son will always have money to live on, consider keeping his inheritance in your trust. Give the successor trustee the power to dole out to him a set amount or a percentage of the money on a regular basis (ie., weekly or monthly), and possibly give your son more or less in the discretion of the trustee. A creditor can only get a limited part of the inheritance while it is in your trust. What is needed for your son’s support is protected. Over and above that, creditors may be able to get up to 25% of any payment made to your son.
The same holds true if you believe your son is in a marriage that could end in divorce. Keep the property in your trust with only a limited amount of money being distributed to your son. However, there is added protection in California. An inheritance is separate property and not community property. If it were the latter, then at your death your son’s inheritance would be owned 50% by his spouse. Being separate property it is owned 100% by your son.