Keeping it in the Family...Priceless
Statistically, 25% of what you have can be lost if you leave your assets to your married children “free of trust”. The biggest threat to your assets after you are gone is the threat that your in-law will end up with half of what you left to your child. Make no mistake, the threat is real. If 50% of married people get divorced and they lose half of what they have in each case, every married person stands to lose 25% to divorce, statistically. So, if you leave assets to married children unprotected, there is a statistical likelihood that 25% of those assets will find their way into the hands of your son or daughter in-law.
Let’s say Jack has two children: Amy and Sam. They are married. Amy is married to Larry. They have one child whose name is Larry, Jr. Sam is married to Darlene. They have one child whose name is Fred. Statistically, one of Jack’s children will become divorced. Let’s assume Jack passes and his assets go to Amy and Sam “free of trust”. Then, let’s assume, Amy gets divorced. Do you think Larry can get some of what Jack left to Amy? If you answered, “yes”, you are right. Larry and his attorney in the divorce proceedings would likely make claim to assets Jack left to Amy. They were left “free of trust” so they are exposed.
What’s the solution? Jack should have directed his assets go to Amy and Sam “in trust”. If the trust is drawn properly, the assets can be protected from loss to in-laws in divorce.
With a little bit of planning, Jack can make sure his in-laws will NOT inherit any of his assets. He can also make sure that when Amy and Sam pass, what is left of their share will go to their children, Larry, Jr. and Fred. Jack can direct that if assets find their way to his grandchildren, that their share will be held “in trust” for their benefit for their education, support, maintenance and health.
Let’s further assume that Fred is autistic. Jack could make sure that whatever may find its way to Fred will be left in a trust that will supplement benefits Fred may receive from the government but that will NOT jeopardize those benefits.
Now, let’s assume Larry, Jr. has had a few run-ins with the law and Jack is concerned that Larry, Jr. needs some incentives to get on the straight and narrow. Jack can provide that if any of his assets find their way to Larry, Jr., good behavior can be incentivized with Larry, Jr.’s trust matching any funds Larry, Jr. earns. This can help promote Larry, Jr. to get a job and be productive. The moral of the story is …it’s amazing what a little planning can do.
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.