Trusts Can Protect and Preserve “Family Property”

With advance planning, you can protect your loved ones from their eventual inability, disability, predators (e.g., divorce claims, alimony claims) and creditors.  When doing your estate planning, if you leave your assets in a “spendthrift trust” for your loved ones, instead of outright, you can protect them.  You can protect them from (1) their inability to manage the assets, (2) their eventual disability, (3) predatory spouses in divorce proceedings who try to get 50% of their 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. 

How does this work?  An example best illustrates.  Let’s say Jack is not married and has one child named Jane who is married to Steve. Jane and Steve have Jack’s only grandchild, Charlie.  Jane is a medical doctor with a busy practice.  Jack does not like Steve.  Also, he thinks Jane and Steve may divorce someday.  Jack wants to leave everything he owns to Jane.  He also wants to make sure that if something happens to Jane, that Charlie will get the assets he left to Jane.  In all events, Jack wants to ensure Steve will not get his assets. 

If Jack has a simple will that says Jane is to get everything, Jane could easily lose the inherited family property.  How? Poor money management, or if Jane becomes disabled and Steve is appointed guardian by the court and he squanders the money, or if Jane and Steve divorce and the court rules Steve is entitled to half Jane’s assets (including the family property Jack left to Jane), or if Jane is sued for medical malpractice and the claimants recover some or all of Jane’s assets (including the family property Jack left to Jane). As you can see, Jane could easily lose the inherited family property with Charlie never seeing a dime.

If, however, Jack left his assets in a “spendthrift trust” for Jane’s benefit with Charlie as a remainder beneficiary, these assets would be protected.  An advisor or financial trustee could make the assets grow and protect them from poor management or poor judgment. If Jane became disabled, Steve would not be able to squander that money.  If Jane and Steve divorced, Steve would not share in the assets Jack left to Jane.  They would be protected because they were in trust.  Also, if Jane were sued for medical malpractice and found liable or decided to settle, the claimants would not share in the assets Jack left to Jane.  As you can see, a little bit of planning can make very big difference for the family and can go a long way towards protecting your family property. 

Our society is litigious and statistics indicate 50% of marriages end in divorce.  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.   

Contributed by:

Mark F. Winn

Attorney at Law, PLLC