When one of your heirs is incarcerated, you need to take extra precaution when leaving the person any money in your will. This is because many states charge inmates for room, board and other expenses and will seize any money they receive once that person is released from jail or prison to pay outstanding balances. If you want to ensure that your heir enjoys the full value of their inheritance, here are two ways you can leave it to him or her.
Leave Non-Cash Assets
States are more likely to sue for recovery of the money spent on the inmates' upkeep if they know the inmates will be receiving cash windfalls. For instance, one inmate received $14,000 from his grandmother's estate and the state sued and won $9,485. Another won $31,690 and had $20,000 of it taken from him by the Illinois Department of Corrections.
The Department of Corrections prefer to go after inmates who have money, because cash is easy to take. While it is possible for the agency to confiscate property, it's harder to do and the department still has to convert the property into cash, which increases the costs of recovery.
Thus, to give your heir a fighting chance at receiving his or her inheritance, you should leave him or her with physical property, such as real estate, a car, or jewelry. Your heir can then either make use of the asset (which may be more beneficial than money) or work with an attorney to protect the cash he or she receives from selling the item(s).
Place Assets in a Discretionary Trust
Another option for leaving cash and assets to your incarcerated heir is to place them in a discretionary trust. This trust functions a lot like a regular one in that you can place assets inside to be released to the beneficiary when appropriate. However, the difference is that with a discretionary trust, the assets are not in any one person's name. Instead, the person managing the trust distributes the assets to a list of beneficiaries at his or her discretion.
The assets don't belong to anyone specifically, so they are protected from creditors who may try to access the money by suing the heir. The state can't take what the debtor doesn't legally own, so he or she won't have to worry about losing the entire inheritance upon leaving prison.
Be aware though, that there should be multiple people listed on the trust. If you only put the one heir's name on the account, the state could argue the asset really belongs to the person and use that to try and access the funds the trust contains. Additionally, you need to appoint someone you trust to manage the account, because this person will have complete control over whether you heir actually gains access to the assets.
For more suggestions on accounting for an incarcerated family member in your will, contact Abom & Kutulakis in the greater Chambersburg, PA area.