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Lifetime Asset Protection Trusts: Airtight Asset Protection For Your Child’s Inheritance—Part 2  

In Part 1 of this series, we discussed a unique planning tool known as a Lifetime Asset Protection Trust. Here we explain the benefits of these trusts in further detail. 

If you’re planning to leave your children an inheritance of any amount, you likely want to do everything you can to protect what you leave behind from being lost or squandered.

While most lawyers will advise you to distribute the assets you’re leaving to your kids outright at specific ages and stages, based on when you think they will be mature enough to handle an inheritance, there is a much better choice for safeguarding your family’s money.

A Lifetime Asset Protection Trust is a unique estate planning vehicle that’s specifically designed to protect your children’s inheritance from unfortunate life events such as divorce, debt, illness, and accidents. At the same time, you can give your children the ability to access and invest their inheritance, while retaining airtight asset protection for their entire lives.

Last week, we discussed how Lifetime Asset Protection Trusts differ from the standard way that most revocable living trusts and wills distribute assets to beneficiaries. Today, we’ll look at the Trustee’s role in the process and how these unique trusts can teach your kids to manage and grow their inheritance, so it can support your children to become wealth creators and enrich future generations.

Total discretion for the Trustee offers airtight asset protection

Most trusts require the Trustee to distribute assets to beneficiaries in a structured way, such as at certain ages or stages. Other times, a Trustee is required to distribute assets only for specific purposes, such as for the beneficiary’s “health, education, maintenance, and support,” also known as the “HEMS” standard.

In contrast, a Lifetime Asset Protection Trust gives the Trustee full discretion on whether to make distributions or not. The Trust leaves the decision of whether to release trust assets totally up to the Trustee. The Trustee has full authority to determine how and when the assets should be released based on the beneficiary’s needs and the circumstances going on in his or her life at the time.

For example, if your child was in the process of getting divorced or in the middle of a lawsuit, the Trustee would refuse to distribute any funds. Therefore, the Trust assets remain shielded from a future ex-spouse or a potential judgment creditor, should your child be ordered to pay damages resulting from a lawsuit.

Becuase the Trustee controls access to the inheritance, those assets are not only protected from outside threats like ex-spouses and creditors, but from your child’s own poor judgment, as well. For example, if your child develops a substance abuse or gambling problem, the Trustee could withhold distributions until he or she receives the appropriate treatment.

A lifetime of guidance and support

Given that distributions from a Lifetime Asset Protection Trust are 100% up to the Trustee, you might worry about the Trustee’s ability to know when to make distributions to your child and when to withhold them. Granting such power is vital for asset protection, but it also puts a lot of pressure on the Trustee. So you probably don’t want your named Trustee making these decisions in a vacuum.

To address this issue, you can write up guidelines to the Trustee, providing the Trustee with direction about how you’d like the trust assets to be used for your beneficiaries. This ensures the Trustee is aware of your values and wishes when making distributions, rather than simply guessing what you would’ve wanted, which often leads to problems down the road.

In fact, many of our clients add guidelines describing how they’d choose to make distributions in up to 10 different scenarios. These scenarios might involve the purchase of a home, a wedding, the start of a business, and/or travel. Some clients choose to provide guidelines around how they would make investment decisions, as well. This is something we can support you with if you decide to use a Lifetime Asset Protection Trust.

An educational opportunity

Beyond these benefits, a Lifetime Asset Protection Trust can also be set up to give your child hands-on experience managing financial matters, like investing, running a business, and charitable giving. And he or she will learn how to do these things with support from the Trustee you’ve chosen to guide them.

This is accomplished by adding provisions to the trust that allow your child to become a Co-Trustee at a predetermined age. Serving alongside the original Trustee, your child will have the opportunity to invest and manage the trust assets under the supervision and tutelage of a trusted mentor.

You can even allow your child to become Sole Trustee later in life, once he or she has gained enough experience and is ready to take full control. As Sole Trustee, your child would be able to resign and replace themselves with an independent trustee, if necessary, for continued asset protection.

Future generations


Regardless of whether or not your child becomes Co-Trustee or Sole Trustee, a Lifetime Asset Protection Trust gives you the opportunity to turn your child’s inheritance into a teaching tool.

Do you want to give your child the ability to leave trust assets to a surviving spouse or a charity upon their death? Or would you prefer that the assets are only distributed to his or her biological or adopted children? You might even want your child to create their own Lifetime Asset Protection Trust for their heirs.

We offer you a wide variety of options that can be tailored to fit your particular values and family dynamics. Be sure to ask us which options might be best for your particular situation.

Is a Lifetime Asset Protection Trust right for you?


Of course, Lifetime Asset Protection Trusts aren’t for everyone. If your kids are going to spend most of their inheritance on everyday expenses and consumables, they probably don’t make much sense. But if you want the assets you are leaving behind to be invested and grown over the long term, a Lifetime Asset Protection Trust can be immensely valuable.

Meet with us to see if a Lifetime Asset Protection Trust is the right option for your family.

In the end, it’s not about how much you’re leaving your loved ones that matters. It’s about ensuring that what you do pass on is there when it’s needed most and put to the best use possible. Schedule a Planning Session today to learn more.

This article is a service of the Law Firm of Myrna Serrano Setty. We don’t just draft documents, we help you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a Planning Session and mention this article to find out how to get this $500 session at no charge.

Lifetime Asset Protection Trusts: Airtight Asset Protection For Your Child’s Inheritance- Part 1

If you’re a parent, you probably want to leave your children an inheritance. But without taking the proper precautions, the wealth you pass could accidentally be lost or squandered. In some instances, an inheritance can even wind up hurting your kids instead of helping them.

Creating a will or a revocable living trust offers some protection, but in most cases, you’ll be guided to distribute assets through your will or trust to your children at specific ages and stages, such as one-third at age 25, half the balance at 30, and the rest at 35.

If you’ve created estate planning documents, check to see if this is how your will or trust leaves assets to your children. If so, you may not have been told about another option that can give your children access, control, and airtight asset protection for whatever assets they inherit from you.

We always offer parents the option of creating a Lifetime Asset Protection Trust for your children’s inheritance. A Lifetime Asset Protection Trust safeguards the inheritance from being lost to common life events, such as divorce, serious illness, lawsuits, or even bankruptcy.

But that’s not all they do.

Indeed, the best part of these trusts is that they offer you—and your kids—the best of both worlds: airtight asset protection AND use and control of the inheritance. What’s more, you can even use the trust to incentivize your children to invest and grow their inheritance.

Not just for the super rich

Lifetime Asset Protection Trusts are not just for the super wealthy. Indeed, these protective trusts are even more useful if you’re leaving a relatively modest inheritance because they can be used to educate your children about how to grow your family wealth, instead of quickly blowing through it.

And without such guidance, most people blow through their inheritance very quickly. In fact, one study found that, on average, an inheritance is totally gone in about five years due to debt and poor investment. Another study found that one-third of people who receive an inheritance actually had a negative savings within just two years.

Also, the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency.

Regardless of how much financial wealth you have (or don’t have), if you plan to leave your kids anything at all, you should do everything you can to make it more likely that they grow what’s left behind, instead of losing it. This way, your resources can have a truly beneficial effect on their lives—and even the lives of future generations.

A Lifetime Asset Protection Trust can achieve each of those goals and so much more.

Not all trusts are created equal

Most lawyers will advise you to put the assets you’re leaving your kids in a revocable living trust—and this is the right move. But as mentioned earlier, most lawyers would structure the trust to distribute those assets outright to your children at certain ages or stages.

And if you’ve used an online do-it-yourself will or trust-preparation service like LegalZoom®, Rocket Lawyer,® or any of the newer options frequently coming online now, you will most likely be offered only two options: outright distribution of the entire inheritance to your kids when you die, or partial distributions when they reach specific ages and stages as described above.

Either of those options leaves their inheritance—and your hard-earned and well-saved money—at risk. Indeed, once assets pass into your child’s name, all of the protection previously offered by your trust disappears.

For example, say your son racked up debt while in college, which can sometimes happen. If he were to receive one-third of his inheritance at age 25, creditors could take his inheritance if it’s paid to him in an outright distribution.

The same thing would be true if your daughter gets a divorce after receiving her inheritance, only it would be her soon-to-be ex-spouse who would claim a right to the funds in a divorce settlement. And despite what you may have heard about an inheritance remaining separate property, once it’s in your child’s hands, outright and unprotected, those assets are at risk.

There’s just no way to foresee what the future has in store for your kids—these kind of events happen to families every day. And that’s not even taking into consideration that your kids might simply blow through the money and spend it all on unnecessary luxuries.

Airtight asset protection – and easy access

Lifetime Asset Protection Trusts are specifically designed to prevent your hard-earned assets from being wiped out by such risks. And at the same time, your children will still be able to use and invest the funds held in trust as needed.

For example, even though the assets are held in trust, your kids would be able to invest those funds in things like stocks, a business, or real estate, provided they do so in the name of the trust. Plus, if your child needs to pull money out to pay for college, a new home, or medical bills, they can do that by asking a Trustee—who’s chosen by you to oversee the money—for a distribution.

Or, as will cover next week, you may even allow your child to become Sole Trustee at some point in the future, allowing him or her to make decisions about the trust’s management.

Obviously, creating a trust like this requires significant understanding of how to properly draft the trust, so don’t attempt to do create one without our guidance. And as you’ll see next week, Lifetime Asset Protection Trusts offer additional benefits that can be used to teach your kids how to invest and grow their inheritance, so that the assets you leave behind can be passed on to their children and beyond.

Next week, we’ll continue with part two in this series on Lifetime Asset Protection Trusts.

We can guide you to make informed, educated, and empowered choices to protect yourself and the ones you love most. Contact us today to get started with a Planning Session.

This article is a service of the Law Firm of Myrna Serrano Setty, P.A. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session,  during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call our office today to schedule a  Planning Session. Mention this article to learn how to get this $500 session at no charge.

Case Update: Jeffrey Epstein’s Estate

When the wealthy financier, Jeffrey Epstein, died under mysterious circumstances (the Medical Examiner determined that is a suicide, but many people are skeptical), he left behind a huge fortune close to $600 million, along with creditors and lawsuits. Just two days before his death, he signed his Will, which left his estate to his trust, the 1953 Trust. Because that Trust is not filed with the Court, its contents should remain private, barring litigation involving the Trust’s beneficiaries or trustee’s duties.

In the Will, Epstein is listed as a resident of the U.S. Virgin Islands. After his death, his Will was filed in the U.S. Virgin Islands, probably because his attorneys thought the probate process would be more private.

For regular people who are not rich or famous, privacy is still a huge deal. That is why many people opt for using trusts in their estate planning, instead of just relying on a Will.

Here are some important differences between a Will and a Trust:

Will characteristics:

  • A will goes into effect only after you die
  • A will only covers property that is in your name at your death
  • A will passes through a court process called Probate. In Probate, the court oversees the will’s administration and ensures the will is valid and the property gets distributed the way the deceased wanted.
  • Because a will passes through Probate, it’s a public record.
  • A will allows you to name a guardian for children (Note: Our firm recommends that in addition to this, you use a stand alone guardian nomination.)

Trust characteristics:

  • A trust can be used to begin distributing property before death, at death or afterwards.
  • A trust covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be put in the name of the trust.
  • A trust passes property outside of probate, so a court does not need to oversee the process, which can save time and money.
  • A trust remains private Unlike a will, which becomes part of the public record, a trust can remain private.

Secure your wealth, your legacy, and your family’s future

Regardless of how much or how little wealth you plan to pass on—or stand to inherit—it’s vital that you take steps to make sure that wealth is protected and put to the best use possible. As your Personal Family Lawyer®, we have unique processes and systems to help you put the proper planning tools in place to ensure the wealth that’s transferred is not only secure, but that it’s used by your loved ones in the very best way possible.

Moreover, every plan we create has built-in legacy planning services, which can greatly facilitate your ability to communicate your most treasured values, experiences, and stories with the ones you’re leaving behind. By working with us, you can rest assured that the coming wealth transfer offers the maximum benefit for those you love most.

This article is a service of the law firm of Myrna Serrano Setty, P.A. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a  Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session at no charge.

To read more about Epstein’s estate and to view a copy of the Will, you can visit the article on the NY Post’s website here.

Learn from this Rock star’s mistakes

Do you have a “blended family”? Learn From Tom Petty’s Mistakes: His Daughters and Widow Are Now Locked In Bitter Battle Over His Estate

Recently, Tom Petty’s daughters escalated the battle over their late father’s estate by suing Petty’s second wife. They’re asking for $5 million in damages. In the lawsuit, Adria Petty and Annakim Violette, claim their father’s widow, Dana York Petty, mismanaged their father’s estate, depriving them of their rights to determine how Petty’s music should be released.

Petty died in 2017 of an accidental drug overdose at age 66. He named Dana as sole trustee of his trust, but the terms of the trust give the daughters “equal participation” in decisions about how Petty’s catalog is to be used. The daughters, who are from Petty’s first marriage, claim the terms should be interpreted to mean they get two votes out of three, which would give them majority control.

Alex Weingarten, an attorney for Petty’s daughters, issued a statement to Rolling Stone magazine, asserting that Perry’s widow is not abiding by Petty’s wishes for his two children.

“Tom Petty wanted his music and his legacy to be controlled equally by his daughters, Adria and Annakim, and his wife, Dana. Dana has refused Tom’s express wishes and insisted instead upon misappropriating Tom’s life’s work for her own selfish interests,” he said.

In April, Dana filed a petition in a Los Angeles court, seeking to put Petty’s catalog under control of a professional manager, who would assist the three women in managing the estate’s assets. Dana alleged that Adria had made it difficult to conduct business by acting abusive and erratic, including sending angry emails to various managers, record label reps, and even members of Petty’s band, the Heartbreakers.

Since Petty’s death, two compilations of his music have been released, including “An American Treasure” in 2018 and “The Best of Everything” in 2019. Both albums reportedly involved intense conflict between Petty’s widow and daughters, over “marketing, promotional, and artistic considerations.”

In reply to the new lawsuit, Dana’s attorney, Adam Streisand, issued a statement claiming the suit is without merit and could potentially harm Petty’s legacy.

“This misguided and meritless lawsuit sadly demonstrates exactly why Tom Petty designated his wife to be the sole trustee with authority to manage his estate,” he said. “Dana will not allow destructive nonsense like this to distract her from protecting her husband’s legacy.”

Destructive disputes, a sad truth

When famous artists leave behind extremely valuable—yet highly complex—assets like music rights, contentious court disputes often erupt among heirs, even with planning in place.

There is a greater chance of such disputes in blended families.  If you’re in a second (or more) marriage, with children from a prior marriage, there is always a risk for conflict, as your children and spouse’s interests often aren’t aligned. In such cases, it’s essential to plan well in advance to reduce the possibility for conflict and confusion.

Petty did the right thing by creating a trust to control his music catalog, but the lawsuit centers around the terms of his trust and how those terms divide control of his assets. While it’s unclear exactly what the trust stipulates, it appears the terms giving the daughters “equal participation” with his widow in decisions over Petty’s catalog are somewhat ambiguous. The daughters contend the terms amount to three equal votes, but his widow obviously disagrees.

Reduce conflict with clear terms and communication

It’s critical that your trust contain clear and unambiguous terms that spell out the beneficiaries’ exact rights, along with the exact rights and responsibilities of the trustee. Such precise terms help ensure all parties know exactly what you intended when setting up the trust.

You should also communicate your wishes to your loved ones while you’re still alive, rather than relying on a written document that only becomes operative when you die or should you become incapacitated.  Sharing your intentions and hopes for the future can go a long way in preventing disagreements over what you “really” wanted.

For your family’s sake

While such conflicts frequently erupt among families of the rich and famous like Petty, they can occur over anyone’s estate, regardless of its value. Attorney Myrna Serrano Setty can  help you draft clear terms for all of your planning documents. And because Myrna is a trained family mediator, she can help facilitate family meetings, where you can explain your wishes to your loved ones in person and answer any questions they may have.

Doing both of these things can dramatically reduce the chances of conflict over your estate and bring your family closer at the same time. And if you have a blended family (meaning children from a prior marriage), we have more ideas about how you can head off future conflict at the pass with proper planning now.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer an estate Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call today to schedule a Planning Session. Mention this article and learn how to get this $500 session at no charge.

Estate Planning Must-Haves for Unmarried Couples – Part 1

Know the Difference: Wills vs. Trusts

Do you know the differences between “will” and “trust”? Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan.

Will characteristics:

  • A will goes into effect only after you die
  • A will only covers property that is in your name at your death
  • A will passes through a court process called Probate. In Probate, the court oversees the will’s administration and ensures the will is valid and the property gets distributed the way the deceased wanted.
  • Because a will passes through Probate, it’s a public record.
  • A will allows you to name a guardian for children (Note: Our firm recommends that in addition to this, you use a stand alone guardian nomination.)

Trust characteristics:

  • A trust can be used to begin distributing property before death, at death or afterwards.
  • A trust covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be put in the name of the trust.
  • A trust passes property outside of probate, so a court does not need to oversee the process, which can save time and money.
  • A trust remains private Unlike a will, which becomes part of the public record, a trust can remain private.

Consult with a qualified attorney to advise you on how best to use a will and a trust in your estate plan.

This article is a service of the Law Firm of Myrna Serrano Setty, P.A. We don’t just draft documents, we guide our clients to help make things as easy as possible for themselves and their families in case of death or disability.

Call us at (813) 514-2946 today and learn how to get a valuable Planning Session at no cost to you.

 

The Key Differences Between Wills and Trusts

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Many people, when they think about estate planning, focus on a will. But wills aren’t the only option, and there’s a lot more to an estate plan than just a will.

Luckily, if you use other tools, such as trusts, you can help keep our loved ones out of court. How do you know whether a will or trust is best for your personal circumstances? The best way is to meet with an attorney for a planning session, to review your goals and needs. From there, you can make the right choice for the people you love.

In the meantime, here are some key differences between wills and trusts:

When they take effect

A will only goes into effect when you die, but a revocable living trust takes effect as soon as it’s signed and your assets are transferred into the name of the trust. A will directs who will receive your property at your death, and a trust specifies how your property will be distributed before your death, at your death, or at a specified time after death. This is what keeps your family out of court if you become incapacitated or die.

Because a will only goes into effect when you die, it doesn’t protect you if you become incapacitated and are no longer able to make decisions about your financial and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a conservator or guardian to handle your affairs, which can be expensive, time consuming, and stressful.

However, with a trust, you can appoint someone to manage your medical and financial decisions for you. This helps to keep your family out of court, which is a huge deal during emergencies when decisions have to be made quickly.

What property they cover

A will covers any property solely owned in your name. A will does not cover property co-owned by you with others listed as joint tenants, nor does your will cover assets that pass directly to a beneficiary by contract, such as life insurance.

A trust can cover property that has been transferred, or “funded,” to the trust or where the trust is the named beneficiary of an account or policy. So if an asset hasn’t been properly funded to the trust, it won’t be covered, so it’s critical to work with an attorney who can help you properly fund your trust.

Unfortunately, many lawyers set up trusts, but don’t make sure that assets are properly re-titled or beneficiary designated, and the trust doesn’t work when your family needs it.

Administration

In order for assets in a will to be transferred to a beneficiary, the will must pass through the court process called probate. The court oversees the will’s administration in probate, ensuring your property is distributed according to your wishes, with automatic supervision to handle any disputes.

Because probate is a public proceeding, your will becomes part of the public record upon your death, allowing everyone to see the contents of your estate, who your beneficiaries are, and what they’ll receive.

But trusts don’t have as much court involvement, which saves time and money. And because your trust doesn’t get recorded with the court, its contents stay private.

Cost

Wills and trusts do differ in cost—not only when they’re created, but also when they’re used. Generally, will-based plans are a lot cheaper than trust-based plans. For example, depending on the options you choose, you might spend an average of $1,500 for a will-based plan. With a trust-based plan, depending on the options you choose, you could spend about $4,000 to set it up. But wills have to go through probate, where attorney’s fees and court costs can add up, especially if the will is contested. That can cost a lot more than setting up a trust in the first place. In addition to the financial costs, think of how much time it is spent in administering a will through the probate process.

The probate process in Florida is not a fast process. Your loved ones could have to wait for months before getting permission to access certain accounts, receive their inheritance or get Court permission to sell property. With a properly funded trust, you can save a lot of time.

When you meet with attorney Myrna Serrano Setty, she’ll carefully analyze your assets and help you design an estate plan that offers maximum protection for your family’s particular situation and budget.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps her clients make informed and empowered decisions about life and death, for themselves and their loved ones. Contact her firm at (813) 514-2946 to get started.