When we first meet with new clients about estate planning, many of them have never considered the possibility of placing protections around the assets that they will leave their beneficiaries. Many of them have never thought about it. Others just don’t understand the need. They have responsible adult children who have never had to deal with divorce, tragedy or disease. Most importantly, they want to “keep it simple.” But they have never thought through what could go wrong.
We look at your relationships, your lifestyle, your assets, and your goals and determine the risks you and your family face. We then discuss the different ways to prevent those problems from occurring. With that knowledge, you can make a reasoned determination as to what level of protection you wish to provide your beneficiaries.
We can’t quantify the risk of your son losing his inheritance in a divorce, bankruptcy, or lawsuit. We don’t know if your daughter will have to spend all of her inheritance to pay for a nursing home, or if she will invest it all in her boyfriend’s new restaurant. We hope your son doesn’t die young, leaving everything he inherited from you to the daughter-in-law you don’t particularly care for instead of your grandchildren. We can’t force your daughter to sign a premarital agreement if she remarries after your death or prevent her new husband from filing for an elective share and take a portion of the assets she inherited from you. But we have seen all of these things happen. And we can prevent them all.
Deciding not to protect against these risks is a valid option. But deciding not to think about them is irresponsible. There are three reasons to use outright distributions. The first is that you do not believe that the risk of any of the potential problems happening to one of your beneficiaries justifies the additional cost of leaving assets in trust. The second is that you do not believe that the extra administrative hassle of administering a trust is justified by the level of risk. The third is that you don’t care what happens to your stuff when you die.
We will keep your estate plan as simple as we can to meet your objectives. Trusts are one of the tools we use to meet our clients’ objectives. They are versatile tools that can accomplish many different objectives. You can choose how they are taxed, who makes decisions about trust assets, when the decision-maker is removed, who gets the benefit of the trust, how long the trust lasts, and what kind of protections they provide. You can create trusts that protect your beneficiaries from numerous problems and still leave them in control of the assets. Or you can create trusts to protect your beneficiaries from themselves. The tools that you use to implement your estate plan should be solutions, not objectives.
You have the opportunity to provide protections for your beneficiaries that they cannot create for themselves. We are all one mistake away from losing everything we have worked for. That does not have to be the case with an inheritance. Leaving assets to your beneficiaries in trust shows them that no matter how life treats them, you cared enough to make sure their inheritance was protected.