How to Best Leave Your Money to Your Children
Trusts Offer Options for Protecting Legacy Assets
By Tom Kirk
I was just visiting with an entrepreneurial friend of mine and the topic of estate planning came up. He mentioned to me that he just updated his estate documents to include a trust for his now sixteen-month-old son. My friend put this trust in place to protect his son’s inheritance, for and from him, until his thirty-fifth birthday, at which time he would have unlimited access to the money because my friend thought his son should be able to handle it by then.
Maybe yes, maybe no.
A well-designed trust can be flexible enough to enable the adult beneficiaries to enjoy and utilize the assets of the trust, but with some very powerful wealth protection safeguards such as protection from creditors, an angry ex-spouse and the child themselves.
In today’s litigious environment it is more important than ever to keep assets safe from being taken through a lawsuit judgment. Settlements from something as common as an auto accident can be in the millions of dollars, far exceeding the limits of most insurance policies. And with the divorce rate now exceeding 50 percent, the asset you intended to stay in your family might instead go to someone else’s family that you don’t even like through a divorce settlement.
Keeping the assets in trust for your adult child can protect them from lawsuits and can work like a prenuptial agreement without the required pre-marriage emotional conversation with the spouse to-be.
What if your adult child has a drug, alcohol or gambling problem? Would having sudden access to a large amount of money cause them more harm than good? This can be addressed in the trust document. If problems like this exist, distributions can be limited. Absent such problems, your adult child can have virtually unrestricted access to the trust funds.
Even though estate tax law has made trusts less necessary for estate tax avoidance, they are still very powerful tools to control and protect your hard earned wealth. Call us today to discuss how to use this and other strategies to grow, protect and enjoy your money.
About the Author: Thomas L. Kirk
CPA-PFS President, Founder and WealthCoachTM
- Certified Public Accountant
- Personal Financial Specialist
- Financial Planning Association Member
- University of Florida, BSBA