The Law Offices of Jeffrey G. Marsocci, PLLC logo - Estate planning attorney is Raleigh and Asheville, NC
The Plain English Attorney

How can you protect the wealth you leave the next generation? There are varying levels of protection depending on how long you want it protected, and how much control and involvement you want the beneficiary to have. In this post and video, I review and compare protections in a Revocable Living Trust, an Asset Management Trust, and a Beneficiary Trust.

Shielding Wealth For The Next Gen

Now we are not protecting your wealth while you’re alive. We are talking about once there is that transition of the money going to your beneficiaries how is it going to be handled and how is it going to be protected.

We have a couple of different ways to do this with various limitations depending on what you are choosing. So let’s jump right into it.

Revocable Living Trust

By far, one of the best planning tools for estate planning is the Revocable Living Trust. It is going to avoid probate, it’s going to get those assets, at the proper time, transitioned to the next generation. But what is it going to protect and for how long.

There is typically an age of outright inheritance. That means you are choosing an age that makes sense. Most of my clients are picking an age of 40 for that outright inheritance. That may sound like it is a long time. But the idea is that those assets are going to stay in that trust until the trustee thinks that the beneficiary is ready or they reach age 40, whichever is going to come first.

So there is a lot of protection there up until they reach the age of inheritance that you picked, where the trustee can spend money for certain things, pay for certain expenses, and buy certain things for the beneficiary, but it’s not money in their pocket yet which leads to the vulnerability.

So what is it going to protect against? The money that is in the trust is going shield wealth from law suites and creditors of the beneficiary, and divorcing spouses of the beneficiary. If there’s a need for liability or a need for Medicaid, those assets aren’t subject to the spend-down as long as they are in there.

Now the Trust that we use through my own office or through the estate planning source, there is triggering language that is in there. If the beneficiary is under a disability then the age limits are off the table. It’s completely at the discretion of the trustee in order to preserve their benefits and have those assets there for the things that the program won’t pay. So that is already taken care of and it doesn’t matter about an age limit.

BUT, this is the important point, there is no protection once the money is distributed. Your wealth is no longer shielded. It is in the beneficiary’s hands and it is theirs, along with all of the vulnerabilities that come with potentially owning property and assets that people may want to take away.

The contingent beneficiaries, again it is dependent on when it is distributed. So if the assets are in the trust and the beneficiary passes on while there are still assets in the trust then it is going where the people who set up the trust said. Typically it is to their descendants, but it could be to anyone. If it is already distributed, and this is something I have to get through to everyone, this trust is going to say it goes to this child at age 40 and then they get it. Oh, what if they die? If they die before it leaves the trust then it goes to their descendants. Oh, I want to control where it goes after it leaves the trust. We can’t do that.

So what other levels of protection do we have? Listen to the entire video to learn more.



Click to access the login or register cheese