What is a Bloodline Trust and When Should I have One?

Many families are concerned with protecting their wealth to ensure their assets benefit future generations. One mechanism to ensure that assets are distributed to specific beneficiaries within a defined bloodline or lineage is by creating a bloodline trust. Any person who wants to safeguard their estate against potential claimants outside of their own family may consider a bloodline trust when they are estate planning.

How do bloodline trusts ensure benefits of a trust are available only to the bloodline?

Bloodline trusts can lock the benefits of a trust to the bloodline in a few different ways.

Provisions to skip generations

Sometimes relationships between parents and children can break down, but grandparents still want their grandchildren to benefit from their estate. By including provisions to skip a generation or generations of beneficiaries, wealth can be preserved effectively without the intervention of the estranged children or other family members whom the person establishing the trust wishes to exclude.

Provisions to protect against misuse and creditors’ claims

It is possible to use a bloodline trust to safeguard the assets in the trust against misuse or creditors’ claims.

The use of specific beneficiary designations

When establishing a bloodline trust, the settlor outlines which eligible beneficiaries are entitled to receive distributions from the trust. Generally, these beneficiaries are limited to direct descendants or individuals with a familial connection within the designated bloodline. By explicitly identifying these beneficiaries, there are a limited number of possible recipients, which means the trust’s benefits are safeguarded and retained within the family.

Limited Powers of Appointment

Bloodline trusts can include limited powers of appointment, which allow the beneficiaries to redirect trust assets to members of the family who are within the bloodline and are deemed eligible to benefit from the trust.

These mechanisms are effective ways of ensuring that the benefits of the bloodline trust are tied to the designated bloodline and that the family’s wealth remains within the family and is passed down through generations. They preserve assets in the long term and allow families to maintain their control over how trust funds are utilised and distributed.

Are there any other benefits of a bloodline trust?

Bloodline trusts are useful when a beneficiary has specific needs or where special circumstances exist, for example, when the beneficiary is a minor, has a disability or otherwise lacks the capacity to handle their own finances. In these situations, beneficiaries can receive financial support while the risk of mismanagement of funds and loss of assets is minimised. Provisions can also be made to attach the benefits to age or other life milestones.

If you are looking for an effective method to protect your wealth for your children, grandchildren and future generations a bloodline trust can be a valuable tool when you are engaged in estate planning. For a deeper understanding of how a bloodline trust can benefit your family and to begin estate planning, contact our experienced wills and estates lawyers who can assess your personal circumstances.