Beneficiary Protection Planning

Because your Legacy will continue for generations we want to make sure the lives of your beneficiaries are enhanced and enriched and the assets you leave to your children are not lost by them or stolen by someone else.
Closely connected to the background, is the border on the picture. The border on a picture helps to focus the viewer on what the photographer wants the viewer to see. Likewise, the border on an Estate Plan serves as the guidance you want to leave for your beneficiaries regarding the assets you are leaving them.

Here, you can give, but do not have to, very specific instructions on what you want your beneficiaries to do with what you are leaving them. For example, you may wish to share your thoughts on what you want your children and grandchildren to do with the assets they have been given. Do you want them to give part of it away? Do you want them to use it for education, travel, or to help give them a head start so they can buy a house or start a business?

The instructions only make sense in relation to the values and foundations you have created while you are living. To put it another way, the border helps define the picture in relation to the background and the foreground.

For years the most popular method of leaving assets to your beneficiaries was to leave them outright. I think this is bad planning because it does not give any protection to your beneficiaries. It is kind of like giving someone a birthday gift; that gift will either be put to use or discarded. I doubt that the giver ever intends to give a gift that they know will be thrown out. Unfortunately, when assets are left outright to your beneficiaries, the gift may be used up very quickly due to the beneficiaries infliction with “sudden wealth syndrome” or it could be subject to the beneficiary’s creditors.

The Heritage Institute reports, “that on average 9 out of 10 families have failed when it comes to keeping their family unified and their assets intact for more than two generations.” To prevent this from happening in your family, I encourage all of my clients to leave their asset in trust to their beneficiaries in a Legacy Trust. A Legacy Trust is created so it will last as long as there are assets in the trust. This way, the trust may last for generations giving your children, grandchildren, and possibly your great grandchildren the ability to enjoy the gifts you are leaving.

There are several additional advantage of the Legacy Trust, such as:

1. The assets are protected from your child’s spouse in the event of a divorce;

2. The assets are protected from your child’s creditors;

3. Your child will not pay any estate tax from their inheritance upon their death; and

4. Upon your child’s death the remaining assets will pass to your blood relatives (usually children or grandchildren) and will not be lost to someone outside of your family.

The Legacy Trust does not come into existence until both you, and your spouse if you are married, pass away. Then, your assets are retitled into the name of your child’s Legacy Trust. Your child will be the primary beneficiary of their own trust, and if you choose, they can serve as trustee.

In addition, your child will have access to the trust income and principle for their health, education, maintenance, and support and you have the opportunity, if you want to use it, to give some very specific guidelines on how the trust assets are to be used. For example, you may wish to give some guidance on how distributions are made for home and family uses, for career and business purposes, or personal enrichment of your beneficiary.

As you consider how you want to leave an inheritance to your children, it is important to know that you are in the best position to provide some asset protection for your children; not them. If you were to leave assets to your children outright, and not in a trust, your child will likely not have the ability to set up a trust for themselves that will provide the benefits discussed above, unless they happen to be in one of the few states that allows a person to establish a self-settled asset protection trust and they are willing to cover the expense of establishing it. So, not only will your children appreciate the benefit you are providing for them, but it will put them on the right track of providing for themselves and their family.