Using trusts in estate planning is valuable in two main ways.
First, assets titled in the name of a trust do not go through probate when the person who created the trust passes.
Second, assets left to loved ones in trust can be protected from taxes, probate, loved one’s own indiscretions, loss to in-laws in a divorce, loss to loved one’s creditors, and you can guarantee that your grandkids will get what might be left over instead of your in-law.
Meanwhile, assets left in trust for a loved one can be structured so the loved one is in control of the property, so they can use it, but they cannot lose it if they get sued or divorced.
For example, let’s say Janice and Frank have been married 30 wonderful years and they have two children named Franklin and Francine.
Franklin is married to Leslie. Unfortunately, Franklin is reckless with money. Franklin has two children: Jerald and Fritz.
Francine is married to Jack and she is very frugal. Francine has one son named Alex.
Janice and Frank own a timeshare in Florida. Their net worth is about $1,500,000 (counting $200,000 life insurance that will pay off on Frank’s death). Janice and Frank want to avoid the cost and delay of probate. They also want to make sure they or their children will not have to hire a lawyer in Florida upon either of their passing. What should they do?
They should each have a revocable living trust that owns their probate property. This will avoid probate in South Carolina and Florida.
The exact titling and beneficiary designations on their assets should be determined with the advice of their estate attorney.
Janice and Frank also want to make sure that Franklin will not squander the money, but they want him to benefit. They want to make sure Francine’s share will eventually go to Alex and not Franklin. What should they do?
They should direct that Franklin’s share goes into a trust that is tailored so Franklin can’t squander the money. They should direct Francine’s share in a trust that directs the remainder interest to Alex.
First, probate will be avoided in Florida and South Carolina.
Second, Franklin will not be able to waste the money. It will last.
Third, Jack (Francine’s husband) will never get that money. Alex will get what is left over.
It is amazing what a good, solid, simple estate plan can do. And so the moral of the story is that a little planning can make a big difference.
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