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:
- their inability to manage the assets,
- their eventual disability,
- predatory spouses in divorce proceedings who try to get 50 percent of their assets, and
- 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.
How does this work? An example best illustrates.
Let's say Arthur is not married and has one child named Florence who is married to George. Florence and George have Arthur's only grandchild, Sam.
Florence is a medical doctor with a busy practice. Arthur does not like George (his son-in-law) and anticipates and hopes Florence and George might divorce someday.
Arthur wants to leave his estate to Florence, but he wants to make sure that George will not get his assets. He wants to make sure that if something happens to Florence, that Sam will get the assets he left to Florence.
If Arthur has a simple will that says Florence is to get everything "outright," Florence could easily lose Arthur's financial legacy and estate.
How? Poor money management, or if Florence becomes disabled and George is appointed guardian by the court, and he squanders the money; or if Florence and George divorce and the court rules George is entitled to half of Florence's assets (including the family property Arthur left to Florence); or if Florence is sued for medical malpractice, and the claimants recover some or all of Florence's assets (including the family property Arthur left to Florence).
If, however, Arthur left his assets in a "spendthrift trust" for Florence's benefit, with Sam as a remainder beneficiary, these assets would be protected.
An advisor or financial trustee could make the assets grow and protect them from poor management or poor judgment.
If Florence became disabled, George would not be able to squander that money. If Florence and George divorced, George would not share in the assets Arthur left to Florence. They would be protected because they were in trust.
Also, if Florence were sued for medical malpractice and found liable or decided to settle, the claimants would not share in the assets Arthur left to Florence.
As you can see, a little bit of planning can make a very big difference for the family and can go a long way towards protecting your family property.
Our society is litigious, and statistics indicate about 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 planning and elder law attorney. www.mwinnesq.com