Privacy, bloodline trusts & asset protection

Keeping your property “out of court” and “in your family” is the name of the game. Leaving your assets in a “spendthrift trust” for your loved ones, instead of outright can protect the funds you leave them from loss to creditors and divorce. 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% of their assets (which could include what were your assets), and (4) their creditors. Please note, they are not spendthrifts necessarily, but if we put a clause saying their right to the income or principal is not subject to lawsuits, then your loved one’s right to the income or principal is not subject to most lawsuits.

This kind of planning can provide you with peace of mind in knowing that what you leave your loved ones will not be carelessly squandered and will not go to predatory spouses or money hungry creditors. You can also guarantee that the money will stay in your family bloodline. Many of our clients what to do this.

For instance, let us assume Frankie is a widower. He has one child, Florence, who is married to Frederick. Frederick is a struggling artist. Florence and Frederick have Frankie’s only grandchild, Ferdinand. Ferdinand loves to play soccer and video games. Florence is a medical doctor with a busy pediatric care practice. Frankie does not like Frederick, and believes Florence and Frederick will divorce someday. Frankie wants to leave everything he owns to Florence but . . . he wants to make sure (1) Frederick will not inherit it and (2) whatever is left will go to Ferdinand. If Frankie has a simple will that says Florence is to get everything, Florence could easily lose the inherited family property in a variety of ways, namely:

(1) Poor money management,
(2) If Florence becomes disabled and Frederick is appointed guardian by the court and he squanders the money, or commingling of funds with Frederick,

(3) If Florence and Frederick divorce and the court rules Frederick is entitled to half of Florence’s assets (including the family property Frankie left to Florence),
(4) If Florence is sued for medical malpractice and the claimants recover some or all of Florence’s assets (including the family property Frankie left to Florence).

If, however, Frankie left his assets through a trust (to avoid probate) in a “spendthrift trust” (to protect the assets) for Florence’s benefit with Ferdinand as a remainder beneficiary (to make sure the assets stay in the bloodline), 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, Frederick would not be able to squander that money. If Florence and Frederick divorced, Frederick would not share in the assets Frankie left to Florence.

They would be protected because they were left to Florence in a trust for her benefit with a clause that directs Florence’s creditors shall not be entitled to Florence’s trust finds. Also, if Florence were exposed for medical malpractice, the funds Frankie leaves to Florence will be protected.

Our society is litigious. Fifty percent of marriages end in divorce. Leaving assets “in trust” instead of outright can provide you with the peace of mind you deserve. It can protect your family and keep your family property in your bloodline.

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