Why Continuing Lifetime Trusts Are a Good Way To Plan for Your Children
By Cam Rogers, Esq.
When putting together an estate plan for your family, one of the most important decisions you will make is who will inherit your legacy. Once you decide who, the goal of an estate planning attorney is to protect the inheritance from others that you have not selected to inherit under your estate plan, for example – creditors, IRS, government healthcare agencies, ex-spouses, spendthrifts, or bankruptcy. The best way to protect your legacy is to set up continuing lifetime trusts for your beneficiaries. Often times the beneficiaries that are listed are your children but continuing lifetime trusts are not limited to just children or even just family; continuing lifetime trusts can be created for any individual that you want to inherit your legacy.
Why Wills or outright gifts leave your children exposed?
Wills, and even Living Trusts that call for “outright” distributions, are generally deficient when it comes to protecting assets for your children. When you say that “everything will be split equally between my son and daughter”, but don’t leave it in trust for them, each of them will inherit 50% in a lump sum, without any legal protections or direction.
Consider these scenarios:
A young girl’s parents die tragically when she is 12. On her 18th birthday, she inherits everything that her parents left behind. Her parents had no reason to know that she would be addicted to drugs, be irresponsible with money, or have negative influences in her circle of friends. The legacy is squandered within months on things that her parents would not have wanted her to buy instead of being used for her long-term support.
A 45-year old man inherits from his deceased mother. To make matters worse, his wife files for divorce 9 months after his mother’s death. When he inherited from his mother, he deposited the entire inheritance in his wife and his joint checking account making it then marital property subject to the divorce.
These examples illustrate that we are doing your children a disservice by potentially subjecting their inheritance to their own spendthrift habits or other potential creditors if we fail to trust-protect assets for them using continuing lifetime trusts.
What is a Continuing Lifetime Trust?
A Continuing Lifetime Trust for your child is a trust that will receive the inheritance that you leave your child upon your death which will remain in trust for the entirety of their life. To be more specific, the estate plan you prepare will leave your assets to your children one of two primary ways, outright to them or to them in trust. Choosing to leave your assets to your child in trust means that upon your death a trust will be formed for your child of which they are the sole beneficiary. The Trust for that child will include language that states that the child should be the only one to primarily benefit from that trust during his or her lifetime. That child can even be named as the sole Trustee (the individual in charge of the Trust) of that trust, therefore, giving them control of the trust upon reaching a certain age or at the existing Trustee’s discretion.
The Continuing Lifetime Trust for your children will hold and protect the assets your children inherit, and can even enjoy broad protection from divorce, creditors, lawsuits, estate taxes of the child, governmental healthcare agencies, and bankruptcy proceedings! This is possible because, technically speaking, your children don’t “own” the assets residing in the trust – the trust does. In general, if we don’t own something, a claim against us personally will not attach to assets not owned by us. However, your children are the only people that can benefit from the assets, so for all intents and purposes, the assets are earmarked for them. What’s more… you can also fully customize these trusts, so that the exact purposes for which you’d want them (or not want them) to be able to access the assets are plainly laid out.
To make sure your children are set up for success, contact Cam Rogers, to review your current estate plan or to discuss whether a continuing lifetime trust is best for you. It is important that you speak to an attorney that is proficient in higher-level Estate Planning since continuing lifetime trusts are not your run of the mill documents. Cam Rogers holds an LL.M. in estate planning and has the requisite knowledge to be able to discuss and draft the appropriate continuing lifetime trusts for your children.
Contact Cam Rogers at (954) 462-1431 or crogers@rmzlaw.com.