Times-Herald Record:  In elder law estate planning, we often think of trusts, wills, powers of attorney, health-care proxies and living wills as documents and tools to express our wishes in the event of disability or death.

One other very important facet of planning is the “beneficiary designation,” a contractual document that directs where an asset goes when you pass away. Most commonly, we see beneficiary designations for life insurance policies, annuities and IRAs and other qualified plans. A proper plan includes careful decision-making regarding the beneficiary, with broad-ranging effects on keeping assets in the bloodline and protecting assets from creditors and nursing home costs.

Inheritance trusts

Inheritance trusts are an increasingly popular way to keeps assets in the bloodline and protect your inheritance to your children from the children's creditors, including divorcing spouses. However, if your assets are held substantially in qualified plans, the contingent beneficiary designation on those accounts should be changed to the children's inheritance trusts, rather than to the children as individuals.

When the first spouse dies, the asset passes to the surviving spouse, and when the second spouse passes away, the assets go to the inheritance trusts. In this way, the children can only leave the qualified plan to your grandchildren or your other children. On the other hand, if you name your children as individuals as the contingent beneficiaries, your children can pass your hard-earned money to a spouse or other non-blood beneficiary.

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