Your Family's Well Being
Planning for the well being of your family requires that you take into account the special circumstances or needs of each member. While one person has the training and ability to manage money well, others may not be so fortunate. Since every person is unique, the question is how can you best support each family member so that they are a success and are provided with comforts that you want them to have. How can you support them so that they continue to develop and achieve their goals?
A well-designed trust can address the needs of each beneficiary in a way that supports them and conserves their resources for as long a period as possible. You might wish to consider implementing the following clauses in your trust:
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Keeping assets in trust: Surveys have shown that the average inheritance is spent
within 8 months of receipt. You can provide that a beneficiary's
assets remain in trust so that the beneficiary receives
regular income payments and the Trustee has discretion
to expend the principal as needed. You can define the
standards to be used in making discretionary payments.
Keeping assets in trust also has the advantage of protecting
assets from creditors. For example, if one of your children
divorces, there would be no danger of their spouse making
claims against the trust.
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Trustee's discretionary distribution: With
a trust, we try to look as far into the future as possible
so as to anticipate how children or beneficiaries develop
into adults. Because we cannot anticipate every event,
many people use a clause which allows the trustee to postpone
distributions to a beneficiary if the trustee determines
that the beneficiary has substance dependency problems
or is unable to prudently manage their financial affairs,
are subject to a creditor's claim, or subject to an existing
or pending divorce proceeding. By giving the trustee discretion
to postpone payments, the odds of the distribution being
used improperly or contrary to the wishes of the trust
creator are maximized.
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Spendthrift clauses: A trust can provide that a beneficiary's income or principal
is not subject to transfer, either voluntary or involuntary.
This is a "spendthrift clause" and prevents
a judgment debtor's interest in a trust from being subject
to enforcement of a money judgment until payment is made
to the beneficiary. As it is usually up to the trustee's
discretion to determine when those payments are made,
that may never happen. The exceptions to this rule are
debts for child support or alimony, money owed to the
federal or state government, or where the debtor is both
the creator and beneficiary of the trust.
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Special needs trusts: A
special needs trust can be used for beneficiaries who
are disabled and receive some form of government benefits.
The beneficiary may be a developmentally disabled minor
or adult. A special needs trust is fully discretionary.
Its purpose is to provide a means for allowing funds to
be used for a disabled beneficiary which will not interfere
with the government benefits which the beneficiary is
receiving, for example, Medi-Cal, SSI, or services through
a local regional center. These trusts are not required
to contain "pay back" provisions, so the trust
may provide for assistance during a beneficiary's lifetime,
then can be distributed to others.
- Co-Trustees: It is often advisable to use a co-trustee to assist a family member in administering a trust and making investment decisions. A co-trustee is also useful if you anticipate that there may be disagreements between the beneficiaries, such as siblings. By using a trust department, accountant or financial planner as a co-trustee, the family member trustee will find the job to be much easier and they will be insulated from the typical family disputes.
By recognizing and accounting for the special circumstances or needs of a beneficiary, you can leave not only a financial legacy, but also a legacy of peace, support and well-being. Trusts can be uniquely crafted to meet your exact requirements and wishes and fully support your family.