Previously, I made the statement that your family can be one of the biggest threats to your estate. The reality is, even if they do not intend to be, the actions or the decisions of your spouse or children or spouse can dramatically impact whether your estate is passed on the way you desire.
Your family, just like all families, must deal with the complications of life. These are the challenges that come, usually unexpectedly, that seem to throw a wrench in the plans we have for ourselves and our loved ones. Of course, our own complications of life will be unique, at least to some degree. But for estate planning purposes, I am going to focus on three categories: Blended families, flawed choices, and bad fortune.
Before I discuss these categories specifically, let me give an example how a trust can help protect against the complications of life.
Many years ago I met with a widowed client. She loved her two children equally and wanted her estate to be split between them.
However, her son struggled with a serious addiction to drugs. She and I both knew if she used a Will to distribute her estate to her children, her son would likely soon be dead. A Will would be effective to get him the money, but it would have no ability to control what he did with the money once he received it. It was highly likely he would use the money to purchase drugs.
So instead of using a Will, we created a trust. The trust provided that, on her death, her son’s half of the estate was not to be given to him. Instead, that money remained in his mother’s trust, and provided for someone she trusted to act as the new trustee. This new trustee was instructed to pay the son’s (appropriate) expenses directly. The money did not go directly to him. For example, rent was paid directly to the landlord. Even though the money was to be used for the benefit of the son, the trust allowed my client to maintain control over how the money was used, even after her passing. This is something a Will could not do.
© 2015 Steven J Wright