Jack E. Stephens wrote the Protective Inheritance Trust (PIT) provisions in 1999 and has updated them over the years. Recently, he copyrighted these provisions based on proprietary legal work and their uniqueness to his Family/Living Trust.
The Problem: In 1999 I was notified by two (2) separate beneficiaries of deceased clients of the loss of their inheritance. A son had placed his inheritance of about $1 Million in a marital, joint account with his wife. Two years later the wife sued for divorce and claimed one-half of the funds as community property. There was a contested divorced and the Court ruled that the son had made a gift to the community property estate and awarded one-half of the marital account to the wife.
In a separate matter, a daughter had sold a rental property she had received as an inheritance and received about $800,000.00. She also placed this into a marital bank account. A few years later, her husband was sued in his business and a judgment creditor was awarded all of the community property of the couple. As a result, the daughter lost all of her inheritance.
How our unique PIT provides benefit to you and your family:
1. Your child’s or other beneficiaries’ inheritance is protected from divorce, lawsuits and creditors at your death;
2. Such inheritance is protected from divorce and lawsuits against your child’s spouse for years subsequent to your death;
3. Since the implementation of the PIT provisions in 2000, our office has received no notice of the loss of an inheritance by a beneficiary;
4. Your child has absolute control of his/her inheritance and may withdraw funds for the needs of his/her family; and
5. *The PIT will provide mental comfort for you as the parent and for your children in knowing that the inheritance will be protected.
What is a Protective Inheritance Trust?
A Protective Inheritance Trust (PIT) is a provision within a family/Living Trust that holds a beneficiary’s inheritance in a protected legal structure at distribution rather than transferring it outright. The inheritance is conditioned on the beneficiary being free from active legal proceedings at the time it is distributed. If a child is in the middle of a divorce or facing a lawsuit when you die, their share remains protected inside the Trust until these proceedings are resolved. In 2016 Attorney Jack Stephens obtained a copyright on his PIT Living Trust provisions.
Can my children still access and use their inheritance under a Protective Inheritance Trust?
Yes. Full access and practical control is a defining feature of the PIT. The beneficiary can withdraw funds for family expenses, investments, education, or personal needs. The Trust holds the inheritance in the child’s own name as sole and separate property, not as a restrictive Trust that ties up assets indefinitely.
How does a PIT prevent a divorce from taking away my child’s inheritance?
When a child receives an inheritance outright and deposits it into a joint account with their spouse, California courts may treat those funds as a gift to the community property estate, meaning the spouse can claim half in a divorce. A PIT prevents this by keeping the inheritance titled in the Trust’s name rather than in the child’s personal name, preserving its character as separate property from the moment of distribution.
Does the PIT also protect against lawsuits against my child’s spouse?
Yes. In California, a creditor who wins a judgment against one spouse can sometimes reach community property to satisfy that judgment. If inherited funds have been deposited into joint accounts and commingled with marital assets, they may be vulnerable. The PIT keeps the inheritance separate and outside the reach of the child’s spouse’s creditors. Since Stephens Law Group began implementing these provisions in 2000, no client has reported losing an inheritance received through a PIT.
Is a Protective Inheritance Trust the same as a spendthrift Trust?
There is overlap, but they are not the same. A spendthrift Trust restricts a beneficiary’s ability to voluntarily transfer their interest and shields funds from creditors before distribution. The PIT provisions at Stephens Law Group go further, addressing California’s specific community property laws and divorce court treatment of jointly-held funds. The PIT also requires the beneficiary to establish their own Sole and Separate Property Trust as a condition of receiving the inheritance, which a standard spendthrift provision does not.
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