It’s true, traditional trusts were designed to avoid probate court costs and estate taxes when you die. However, avoiding these expenses at death is much different than protecting yourself during your life. Traditional trusts are not designed to protect you before you die, nor to protect your children or grandchildren after you die. A comprehensive estate plan would include “Lifetime Planning, Post-Death Planning and Generational Planning.” Candidly, these are the 3 areas where you are most vulnerable.
Life Time Planning
“What if you and your spouse need protection before you die?” (Physical disabilities, mental illness and financial predators must be anticipated.)
The most important of the 3 areas is “Lifetime Planning” because it is all about protecting you during your lifetime. “Lifetime Planning” ensures that your needs are addressed during any period of your disability, whether physical or mental, temporary or permanent. No planning is more important than addressing these serious and frightening conditions before they occur. Ironically, planning for these eventualities is usually overlooked. If your present plan does not adequately address “Lifetime Planning,” the consequences can be serious, financially and medically. We help many clients plan to avoid nursing home poverty.
Although disability planning is the first and most significant element of “Lifetime Planning,” there are two other areas that you need to address. The second involves protecting your Trust assets if the surviving spouse re-marries. The third provides protection for you and a surviving spouse from unfriendly creditors, including nursing homes. Traditionally trusts don’t provide this protection. This can be corrected.
“What happens to the inheritance if your kids have financial challenges?” (Bankruptcy, divorce, and lawsuits can happen to good, responsible children.)
A huge benefit you can give your children when they receive their inheritance is protection. Giving your children assets is not the same as giving them protected assets. Protecting their inheritance is called “Post-Death Planning.” Your children cannot provide this protection for themselves; only you can give it to them.
What if your assets never make it to your Grandchildren?” (More and more trust assets end up in the hands of unintended beneficiaries leaving grandchildren disinherited!)
Most clients don’t realize that if you name your grandchildren as alternate beneficiaries, your children must predecease you in order for your grandchildren to receive any portion of the estate. The problem is once the assets come out of the trust, you lose the ability to control whether or not the estate will ultimately go to your grandchildren. Giving yourself this control for the benefit of your grandchildren is called “Generational Planning.” There is nothing more disheartening than a grandchild’s education being jeopardized because the assets of the trust never made it to them. Often, assets are distributed to an unintended beneficiary, such as a son-in-law or daughter-in-law. I have nothing against “in-laws,” but if you intend for them to be beneficiaries of your trust, they should be listed in the trust as such. If they are not intended beneficiaries, they should not, accidentally, become the recipients of your trust assets.
How can I be sure I am protected by my estate planning?