Typically, New Jersey estate planners advise their clients to provide that property pass outright to the children on the death of the surviving parent, pass into a trust for the benefit of the children with provisions for outright distribution to them at one or more stated ages, or pass into lifetime trusts for the children.
The exposure to creditors’ claims of assets inherited by children who receive those assets outright, either on the death of their parents or at a stated age, is evident and does not need further discussion. However, it is not intuitively apparent that assets within lifetime trusts parents create for their children also may be subject to creditors notwithstanding standard spendthrift clauses. Most attorneys who draft trusts do so with an eye to complying with federal and state death tax requirements and feel they have done their job if the trusts they draft protect those assets from taxes when the children die.
Non-Tax Issues
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