'Spendthrift trust' protects family property, assets

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With advance planning, you can protect your loved ones from their eventual inability, disability, predators and creditors. When doing your estate planning, if you leave your assets in a "spendthrift trust" for your loved ones, instead of outright, you can protect them.

You can protect them from: 1. their inability to manage the assets; 2. their eventual disability; 3. predatory spouses in divorce proceedings who try to get 50 percent of the assets (which could include what were your assets); and 4. their creditors.

This kind of planning can provide you with peace of mind in knowing that what you leave your loved ones will not be carelessly squandered, and will not go to predatory spouses or money-hungry creditors.

You can also guarantee that the money will stay in your family bloodline. Many of our clients want to do this.

For instance, let us assume Emmanuel is not married and has one child named Fiona, who is married to Frankie. Fiona and Frankie have Emmanuel's only grandchild, Sampson.

Fiona is a medical doctor with a busy practice. Emmanuel does not like Frankie. Also, he thinks Fiona and Frankie might divorce someday.

Emmanuel wants to leave everything he owns to Fiona, but he doesn't want Frankie to get his assets or control over his assets, and he wants to make sure that if something happens to Fiona, that Sampson will get the assets he left to Fiona.

In all events, Emmanuel wants to ensure Frankie will not get his assets.

If Emmanuel has a simple will that says Fiona is to get everything, Fiona could easily lose the inherited family property in a variety of ways, namely:

  1. poor money management,
  2. if Fiona becomes disabled and Frankie is appointed guardian by the court and he squanders the money,
  3. if Fiona and Frankie divorce and the court rules Frankie is entitled to half of Fiona's assets (including the family property Emmanuel left to Fiona),
  4. if Fiona is sued for medical malpractice and the claimants recover some or all of Fiona's assets (including the family property Emmanuel left to Fiona).

If, however, Emmanuel left his assets in a "spendthrift trust" for Fiona's benefit with Sampson as a remainder beneficiary, these assets would be protected.

An advisor or financial trustee could make the assets grow and protect them from poor management or poor judgment.

If Fiona became disabled, Frankie would not be able to squander that money.

If Fiona and Frankie divorced, Frankie would not share in the assets Emmanuel left to Fiona. They would be protected because they were in trust.

Also, if Fiona were sued for medical malpractice and found liable or decided to settle, the claimants would not share in the assets Emmanuel left to Fiona.

Our society is litigious and statistics indicate 50 percent of marriages end in divorce. Leaving assets in trust instead of outright can provide you with the peace of mind you deserve and protect your family and your family property.

Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate planning and elder law attorney. www.mwinnesq.com

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