In these articles, I have consistently encouraged each reader to make sure she/he has a valid Will as well as a power of attorney for finance and a health care advance directive. I am going to give you one more reason, just in case you are still having doubts about the importance and advantage of a Will…
Here goes….Would you like to make sure that the funds you leave for your children/surviving spouse are protected from their creditors and predators after your death? You can do that by creating a testamentary trust for their benefit in your Will. The Trustee can be directed to make distributions for the benefit of your child or spouse, essentially for their support, maintenance and education. In other words, the beneficiary can have very liberal distributions made to them yet the asset can have protection from an outside party taking it away from them. The manner in which an asset is titled determines who can access that asset. If my house is titled in my name, my creditors/predators can reach it. If the asset is held in a trust, it is simply not in my name for purposes of my creditors.
The way this works: in your will, you do not leave the asset outright to a child (or spouse); instead you leave it to them in a trust. The beneficiary can be their own Trustee which obviously increases flexibility, but decreases accountability. You choose in your will whatever accountability level you want the beneficiary to have. If, however, the beneficiary does not keep this asset in a separate account and treats it as if it were his/her own property, the property loses its protection.
Many times clients come into our office and want to protect an asset they own from their creditors. Once again, the manner in which an asset is titled is everything. Protection is very difficult to accomplish if I receive an asset outright; however, if the property is received in a testamentary trust, it has creditor protection since it is not held by the individual. This trust would have its own tax identification number, once again, supporting the fact that it is not in the beneficiary’s name, but in the name of a separate entity, namely, the trust.
Now, let’s explore what I mean when I refer to “creditors” and “predators.” You may be thinking that you pay all your bills and do not have “creditors” and you may be right; however, in the litigious society in which we live, you never know who may decide to sue you frivolously for something for which you should not bear responsibility. Also, in an economic downturn, things happen to us that we may never have expected. Now, what about “predators”… this would be anyone trying to take advantage of your surviving spouse or your children. As we are well aware, many unscrupulous companies prey on the elderly. This trust would protect assets from these companies. Also, in the event your child or your surviving spouse is involved in a divorce action after your death, the ex-spouse would not have the ability to get to the assets in the trust of your child or your surviving spouse.
This trust could also control how assets would be distributed at the time of your child/spouse’s death. This can be of particular importance in a blended family. You may want to make sure that ample provision is made for your surviving spouse after your death, yet you want to also be assured that whatever is left at the time of his/her death is distributed to your own children. The trust could make such provision. Also, in the event of your child’s death, you may not want those assets to be distributed to the child’s spouse. If you want those assets to remain in your bloodline and be ultimately distributed to your grandchildren, this is made possible by setting up a trust in your will.
Now, that is good stuff, isn’t it? Once again, planning is everything. The law gives us the opportunity to plan; we have to take advantage of it. Do it…today!