Bloodline trusts work because they avoid problems

“Bloodline trusts” are trusts that keep your assets in your family bloodline.  When we do this, assets left to loved ones “in trust” will be protected from lawsuits (e.g. loss in divorce) and will avoid exposure to estate taxes in the loved one’s estate and will stay in the bloodline.  So, they avoid problems (lawsuits, taxes), and they stay in your family. 

For example, let us assume, Blake and Sarah have two children, Henry and Jasmine.  Henry is a successful surgeon and is married to Katherine.  They have two children whose names are Laura and Sue.  Jasmine is an elementary school teacher who is married to Jack.  He is a struggling artist.  They have one child whose name is Max.  Max is autistic.

WITH NO BLOODLINE TRUST PLANNING: If Henry and Jasmine inherit free of trust, then if they get sued or divorced, they can lose their inheritance.  Since they will own the inheritance free of trust, there is nothing to protect the inherited funds from loss in a lawsuit, bankruptcy or a divorce.  If Henry gets sued for medical malpractice, he could lose all his inheritance.  If Henry does not get sued but successfully accumulates wealth, then what he inherits could be exposed to the federal estate tax when he passes.   If Jasmine passes or predeceases and her share goes to Max, this windfall could jeopardize Max’s ability to qualify for government benefits.  All of these things can and often do happen to families who fail to act, who fail to plan ahead to neutralize these threats. 

WITH BLOODLINE TRUST PLANNING: If Henry and Jasmine each inherit their share pursuant to the terms of a trust for their benefit, then monies or assets can be available for their use and benefit during their life, but not subject to loss in divorce, to loss in most lawsuits or estate taxes in their estate. Also, Blake and Sarah can ensure that their hard-earned assets will benefit generations as they will stay in their family bloodline.

Effectively, their trust can direct that when Henry and Jasmine pass, that their share (or what is left of it) goes to their children (in the bloodline).  They can provide that if this happens, the share for Max will be held in a special needs trust which will preserve Max’s ability to qualify for government benefits.  If they think Jasmine will waste the money by careless spending, they can have Henry serve as trustee, alone or with another, to administer the monies for the benefit of Jasmine. 

When planning your estate, all of these matters require attention.  Professional guidance and counsel is imperative to success in this arena.  The moral of the story is that a little bit of planning and “bloodline trusts” can ensure your assets will stay in your family.

Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com