We have all heard the old adage “an ounce of prevention is worth a pound of cure.” Taking steps now to avoid problems later can provide tremendous benefits for your family.
When it comes to estate and asset protection planning, preventing or avoiding problems is usually the main objective.
The problems you can avoid with a good plan are:
1. Avoid probate and lack of privacy in the probate process;
2. Avoid extra court cost and legal fees in the probate process;
3. Avoid unnecessary federal estate taxes;
4. Avoid losing maximum deferral on income taxes in retirement plans;
5. Avoid loss to in-laws in divorce or creditors.
The above items are the main benefits of estate planning. To protect your assets, we can create legal structures (trusts) that will own assets so as to ensure your wishes will be carried out and that your family’s beneficial interests will be secure and exempt from the clams of most of their creditors.
The funds in trust can also prevent loss to in-laws in divorce. We can basically use trust law to ensure assets will be kept in the blood family.
Consider, for instance, hypothetical Jack and Jill have a son named John, who is married to Jane. They have a son named John, Jr.
Jack and Jill do not want Jane to have access to or control of John’s inheritance. What should they consider? They should consider leaving John’s share in a trust for his benefit.
The trustee will be John, and when John passes, the trust will go to John, Jr. If drafted properly, the monies in the trust for John will be available to him at his discretion for his wants and needs.
The money will be protected from lawsuits, not included in his estate for estate tax purposes, and will stay in the family as you direct. Will Jane ever have access or control over Jack and Jill’s assets? No.
A good plan should avoid the above problems and provide for a variety of contingencies. It should also provide flexible provisions allowing the trustee broad discretion to carry out the purposes of the trusts.
Just as in the field of medicine where prevention is quite valuable, so too, in the legal realm, when it comes to your family and your property, a good plan can prevent many problems and give your family peace of mind.
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