Statistically, one out of every four dollars you leave “free of trust” to a married child will be lost in a divorce.
Approximately 50% of marriages end in divorce. When people become divorced, they typically lose half their assets. This can happen if assets become commingled.
Thus, one out of every four dollars you leave free of trust to a married child stands to be lost in divorce.
Can you protect against this? Yes, by leaving your assets to your beneficiaries “in trust.”
If you leave assets in trust for loved ones, you can assure the assets will be protected from lawsuits, predatory spouses in a divorce, creditors, and estate taxes.
If you leave assets free of trust to loved ones, they will have full ownership, but the assets will be exposed to lawsuits, predatory spouses in a divorce, your loved ones’ creditors, and the estate tax in loved ones’ estate.
Can your child be the trustee of his or her own trust and still get the asset protection? Yes, so long as the trust is carefully crafted with proper language.
Leaving assets in trust for a child with the child serving as his own trustee is kind of like leaving money to your child in a lock box and the child is the only one who holds the key to the box.
Furthermore, if the trust is drawn properly, the assets will be protected from lawsuits including divorce. In addition, you can make sure your assets will stay in your family bloodline.
A good estate plan will leave assets in trust so as to protect the property from threats. Special instructions need to be in a trust in order to assure maximum income tax deferral on retirement assets.
Twenty-five percent is a lot to lose to an in-law in a divorce, when some advance planning can guarantee no loss.
The moral of the story, as always, is that you must plan ahead in order to protect your property and your loved ones’ inheritance.
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