Keeping Your Assets in Your Family
is Easy if You Plan For It
Leaving assets to a loved one “in trust” is essential if you want to protect the assets from being lost in a divorce or a lawsuit. Leaving assets “in trust” means that the loved one has inherited a beneficial interest. If this interest is protected by a spendthrift clause, is clearly defined, there is a co-trustee, and the trust directs the remainder to stay in the family, then once the assets are inherited, they will be protected from loss in a divorce.
Let’s say Mom has a son, Victor, who is married to Jane. Victor and Jane have a son named Max. Mom does not really like Jane that much. Mom wants to leave her assets to Victor but she wants to make sure that Jane will not get those assets. What should Mom do? She should direct that when she passes, her assets are to go into a “trust” for the benefit of Victor. Mom can make Victor the trustee of his own trust, and she can direct that when Victor passes, what is left will go to Max. If Mom wants to make sure Jane has no influence or control over the trust funds, Mom can make it so Victor and someone else (other than Jane) serve as co-trustees with the duty to act jointly. If it is clear that Victor gets all the income and principal for his needs, then Mom’s assets and legacy is protected, and Max’s future interest is protected.
We usually would direct that if Max were under a certain age, his share would be held “in trust” for his health, education, and maintenance. Here, we would need to determine who Max’s trustee would be. In the above example, Mom would probably not want Jane to be the trustee, but every case is different. In addition, we would usually also direct, just in case, that in the event that Max or another of Mom’s grandchildren had special needs and were receiving government assistance, that their inheritance would be held in a trust (a special needs or supplemental needs trust) designed to benefit the grandchild while NOT jeopardizing his government benefits. There are many things we can do with a well-constructed estate plan.
George S. Patton was once quoted as saying “A good plan, violently executed now, is better than a perfect plan next week”. It is easy to keep your assets in your family, but you must plan for it.
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.