If you have loved ones that might inherit from you and they are potentially subject to lawsuits, divorce or bankruptcy, then you owe it to them to make sure they receive their share, pursuant to the terms of a spendthrift trust.

They can still have total control as trustee. So, it is not as if you are trying to protect the assets from them, but rather from their creditors.

If you want to, you can also make sure your assets will stay in your family and go down to grandchildren, not to in-laws.

A United States Supreme Court decision came down in favor of creditors. The issue, presented in Clark, et ux v. Rameker, 573 U.S. (June 12, 2014) was whether or not funds in an inherited IRA are protected from bankruptcy.

The highest court in the land ruled that they are NOT protected as “retirement funds,” as they are defined in the bankruptcy code. This decision favors creditors.

So, if you are leaving assets to a child who has or could have creditor problems, then it is advisable to leave the child’s share in a trust. This would include the retirement assets.

When this is done, care is imperative to insure that the required minimum distributions from the inherited IRA will be stretched out as long as possible. Careful coordination of beneficiary designations on file with the plan administrator is necessary.

With life insurance, however, the proceeds can usually be directed via beneficiary designation to the trustee of the trust the client creates. That way, they can get the proceeds in their fiduciary capacity and it does not go through probate.

It also is good to do it this way because the trust has addressed all of the contingencies. Thus, when after-tax money like insurance proceeds are paid to a trust, you can be sure it will avoid probate and it will do what you wanted.

With real estate, we are often facing situations where a couple wants to ensure the house goes to each other, then it goes to their children, or, in second marriage (blended family) situations, half to the husband’s children from prior marriage and half to the wife’s children from prior marriage.

Using trusts to control the remainder interest is the key to successfully completing these important objectives.

Sometimes, and more often nowadays, clients wish to take steps to ensure their house will be protected from estate recovery if they need Medicaid. Considering 70 percent of people that are older and in need of long term care are on Medicaid, taking steps now to ensure your house will stay in your family and not go to the state (to recover for your health expenses) is a good thing to do.

The law imposes a penalty on transfers made within five years, so advance planning in this area is key.

Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com