With advance planning, you can protect your loved ones from their eventual inability, disability, predators (e.g., divorce claims, alimony claims) and creditors.
If you plan to leave your assets in a “spendthrift trust” for your loved ones, instead of outright, then you can protect them; leaving it in such a trust will protect the monies from lawsuits (exceptions: IRS and child support), and make sure it stays in your family.
You can protect your loved ones from: 1. their inability to manage the assets; 2. their eventual disability; 3. predatory spouses in divorce proceedings who try to get 50 percent of their (and your) assets; and 4. their creditors.
This kind of planning can provide you with the peace of mind of knowing that what you leave your loved ones will not be carelessly squandered, and will not go to predatory spouses or money-hungry creditors.
For instance, let us assume Jack is not married and has one child named Elaine, who is married to Fritz. Elaine and Fritz have Jack’s only grandchild, Sampson.
Elaine is a medical doctor with a busy practice. Jack does not like Fritz.
Also, he thinks Elaine and Fritz might divorce someday.
Jack wants to leave everything he owns to Elaine.
He also wants to make sure that if something happens to Elaine, that Sampson will get the remainder of the assets that he left to Elaine.
In any event, Jack wants to ensure Fritz will not get his assets.
If Jack has a simple will that says Elaine is to get everything, Elaine could easily lose the inherited family property by 1. poor money management; or 2. if Elaine becomes disabled and Fritz is appointed guardian by the court and he squanders the money; or 3. if Elaine and Fritz divorce and the court rules Fritz is entitled to half of Elaine’s assets (including the family property Jack left to Elaine); or 4. if Elaine is sued for medical malpractice and the claimants recover some or all of Elaine’s assets (including the family property Jack left to Elaine).
If, however, Jack left his assets in a “spendthrift trust” for Elaine’s benefit, with Sampson as a remainder beneficiary, those assets would be protected.
An advisor or financial trustee could make the assets grow and protect them from poor management or poor judgment.
If Elaine became disabled, Fritz would not be able to squander that money.
If Elaine and Fritz divorced, Fritz would not share in the assets Jack left to Elaine. They would be protected because they were “in trust.”
Also, if Elaine were sued for medical malpractice and found liable or decided to settle, the claimants would not share in the assets Jack left to Elaine.
Our society is litigious, and statistics indicate 50 percent of marriages end in divorce, so planning ahead is important.
Leaving assets “in trust” instead of outright can provide you with the peace of mind you deserve and protect your family and your family property.
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