Leaving Assets “In Trust” Solves Many Problems

If you have children, ask yourself the following questions:

(1) Are any of them married?

(2) Are any of them bad at handling their finances?

(3) Are any of them in a high risk profession?

(4) Are any of them disabled and receiving government benefits?

(5) Are any of them currently having financial difficulty?

(6) Are any of them struggling with chemical dependency?

(7) Are any of them incarcerated?

If you answered yes to any one of the above questions, then it may be advisable to leave assets to them “in trust” for their benefit.  By doing so, you can ensure that the assets will benefit them and you can ensure the assets will be protected from loss.

Let’s say Jack and Dianne are happily married.  They are in a second marriage.  They each have children from a prior marriage.  The names of Jack’s children are Sam, Steven, and Carrie.  Sam is a medical doctor.  Steven has chemical dependency problems and has filed for bankruptcy twice.  He is not good with money.  Carrie is married to Jake who Jack really dislikes.

The names of Dianne’s children are Max, James and Susan.  Max is disabled and receives government benefits due to his disability. James is married to Sandra who Dianne likes but does not trust.  Susan is in prison for check fraud. 

What could Jack and Dianne do?

With good planning, they can ensure each other has full use and benefit of assets during their life and the remainder will go ½ to Jack’s children and ½ to Dianne’s children. 

But they can also ensure:

(1) that what Sam inherits will never be lost to a medical malpractice lawsuit,

(2) that Steven will benefit from the assets and will not waste the money on drugs, (3) that if Carrie gets divorced, Jake will never see a penny of assets Jack left to Carrie,

(4) that Max will not lose his government benefits due to his inheritance,

(5) that James will not lose money he inherits due to unscrupulous activities of Sandra, and

(6) Susan’s share will be protected while she is incarcerated. 

How can they accomplish all of the above? 

Answer: They can use trusts to control interests and protect interests from lawsuits.  By leaving assets “in trust” they can tailor beneficial interests and protect assets from loss.  To say that the only reason to use trusts or trust law is to (1) avoid probate or (2) avoid tax is myopic.   

If someone told you dentistry is all about filling cavities, you would know they were not telling you the whole truth.  Why?  Dentistry incorporates cosmetic dentistry, teeth cleaning, bridge work, crowns, gum disease, orthodontics and much more…I assume.  Just as dentistry is much more than filling cavities, using trusts and trust law to plan your estate is much, much more than . . . (1) avoiding probate, and (2) avoiding taxes.    

Contributed by

Mark F. Winn, J.D., LL.M. in Estate Planning is a local tax, asset protection and estate planning attorney