Keeping Your Assets "All in the Family" The majority of people who set up wills and revocable or irrevocable trusts leave their assets outright to their children in equal shares when they die. There is nothing wrong with that, but there may be a better way. Instead of leaving your assets outright to your children, consider the potential advantages of leaving your assets to your children's trusts, which you can design and create during your lifetime. A descendant’s trust is created by you, today, as grantor, naming your child as trustee and beneficiary when you die. For example, if your daughter was Mary Carter, the trust would read "Mary Carter, as Trustee of the Mary Carter Trust." There are a number of good reasons to create trusts for your children today. Just as you've learned about the benefits of a trust, your children will probably wish to avail themselves of the same opportunity one day. But in the case of your children, there are a number of additional benefits to leaving assets to them in trust as a part of your own estate plan. These are:
These trusts may be drafted to provide that, during your children's lifetimes, they have complete access to the income and the principal of their trusts - so that you're not necessarily giving them a "gift with strings attached" or "ruling from the grave." (If circumstances are warranted, you may elect to impose tighter control over these assets.) But when your child dies, you can ensure that the unused portion of their inheritance goes to your grandchildren. If the grandchildren are under age 30, for instance, you may direct the funds to be held in trust for them until then, with the Trustee (which may be one of your other children) using so much of the assets as may be needed for their health, education, maintenance and support. Once the grandchild reaches age 30, you may want them to be the Trustee of their own trust. If one of your children dies without leaving children, then the trust funds go to that child’s surviving brothers and sisters. While we are preparing or reviewing your estate plan, we can offer these trusts to you at a fraction of the cost it would be to your children if they were to go out and set these trusts up for themselves, either now or many years later when they receive their inheritance. In addition to the cost saving of creating this type of trust within your own estate plan, in the overwhelming number of states, including Texas, once your children have inherited, it is too late for them to create their own protective trust. The reality of a descendant’s trust is that it is much easier for your child to keep assets separate from a spouse when these assets are left to them in trust. On your death, all of your assets are re-titled directly from your trust to your children’s trusts. There is a world of difference when a child can say to their spouse "my parents left this money to me in a trust" compared to their receiving the inheritance "in hand," and having to take active steps to keep those assets separate from a spouse, or try to shelter them from an unexpected lawsuit. If you're going to leave it all to them anyway, consider leaving their inheritance to them in a protected trust by doing some additional good planning for them today. Your children will greatly appreciate what you've done to put them on the right track to plan for themselves and their families. If you would like to discuss whether a descendant’s trust makes sense for you and your family, please call me at 210-651-3851 to arrange for a complimentary consultation.
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