Good offense, defense needed to win estate planning game
Mark F. Winn
The best strategy to win any game is to have a good offense and a good defense.
In the realm of creating financial security, a good offense is essential. Here, it is necessary to be efficient and to work smart. Luck, too, sometimes plays a role.
In the realm of protecting and preserving your created wealth or financial security, a good defense is essential. Here, it is necessary to identify the potential threats to your wealth. Once you have identified the threats, you should seek to learn the solutions.
Some of the main threats to your wealth are income taxes, estate taxes, gift taxes, generation-skipping taxes, unnecessary administrative expenses, disputes, lawsuits, divorce, long term care costs and nursing home expenses.
The good news is that with proper advance planning, you can structure your affairs so that all the above threats are minimized or avoided completely.
With the use of a revocable living trust and some care applied to the titling of assets and beneficiary designations on file with the custodian of retirement plans and life insurance, taxes can be minimized or avoided and administrative expenses can be minimized.
Also, leaving assets in trust can protect these assets from divorce and lawsuits.
All of the above problems can be minimized or avoided altogether with advance planning.
Let's imagine Eleanor has a daughter named Jenny who is a medical doctor. If Eleanor leaves assets in trust for Jenny's benefit, these funds can be protected from lawsuits Jenny might be exposed to as a physician. Leaving assets in trust can ensure that these funds will benefit Jenny and Jenny's children.
Is that good defense? You bet it is.
Now let us imagine another scenario: Trevor has a son named Jack who receives government benefits because Jack has a disability. If Trevor fails to leave assets in trust for Jack, the benefits Jack receives from the government could be in jeopardy.
Leaving assets in trust for Jack's benefit can help ensure these assets will be there to supplement any benefits the government provides, instead of the benefits being lost.
Is that good defense? Yes, it is.
The message to be had is that the law may be used to protect. With advance planning, you can protect your loved ones from their eventual inability, disability, predators (e.g., divorce claims, alimony claims) and creditors.
When doing your estate planning, if you leave your assets in a "spendthrift trust" for your loved ones, instead of outright, you can protect them from 1. their inability to manage the assets; 2. their eventual disability; 3. predatory spouses in divorce proceedings who try to get 50 percent of their assets; and 4. their creditors.
This kind of planning can provide you with the peace of mind of knowing that what you leave your loved ones will not be carelessly squandered, and will not go to predatory spouses or money hungry creditors.
Our society is litigious and statistics indicate 50 percent of marriages end in divorce. Leaving assets in trust instead of outright can provide you with the peace of mind you deserve and protect your family and your family property.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. www.mwinnesq.com