Bob and Mary are 75 year-old couple who lived their
life working hard and always saving a portion of what
they earned. Fortunately for them, they are able to
maintain a comfortable lifestyle in retirement. While
not considered wealthy, their $500,000 has always
generated more than enough income combined with their
Social Security and pension to remain financially
independent. They are proud of their three children.
Their oldest son, Bob Jr., is a doctor and married with
four children. He is financially successful and has a
strong family.
Their middle child, Maria, is a school teacher and
married to Jim, who was a very nice guy, but on his
third business. The businesses seem to work for a little
while and then eventually fall apart. Their youngest,
George, is married but has no children. While diagnosed
with multiple sclerosis, he shows no current symptoms,
but understands later in life, problems will arise. Bob
and Mary are not fond of George’s wife. George and his
wife live paycheck to paycheck and never really seem to
be able to make ends meet, but they are happy.
Bob and Mary came in to visit with their attorney. In
their initial meeting, the attorney began with a simple
question: What is it that you would like us to help you
accomplish? Not unlike many other clients that walk
through the attorney’s doors, Bob and Mary expressed how
they had worked their lifetime, built what they had and
they wanted to make sure it was protected from the
government, nursing homes, lawsuits, or other predators.
They also indicated it was very important to remain
in control and stay independent. They never want to
become a burden to their children. So in essence, they
want to remain in complete control and have their assets
100 percent protected. They wanted their cake and be
able to eat it too. Lucky for them, there was a
solution.
The attorney reviewed numerous estate planning issues
to identify which were most important. After identifying
their goals and objectives, the attorney recommended a
special type of trust that is a separate legal entity
but not a separate taxable entity; it uses their social
security number.
The advantage to the type of trust is that Bob and
Mary can put their assets in the trust without any tax
consequence and retain favorable tax treatment after
death that would not be available if they transferred
the assets to their children during life. In addition,
since it is an irrevocable trust, their assets are
protected from lawsuits, predators, creditors, and yes,
perhaps even the nursing home.
Bob and Mary were very interested to learn that they
could maintain full control of the trust by remaining as
trustees and they would also have the ability to retain
the right to change beneficiaries, timing, manner, and
method of distribution all the administrative provisions
in the trust.
The only caveat was that they had to agree they would
never again access the principal. The trust also permits
Bob and Mary to retain all of the income from the trust,
and have the entire principal available for the
children, grandchildren or other family members, if
needed.
In fact, it could be available to anyone, except
them. While they initially did not like the idea of
giving up access, they were much more comfortable
staying in control. The reality was, they didn't want
the money for themselves anyway but merely for the
family.
Bob and Mary had always been told that if they
created an irrevocable trust, they would not be able to
control it or change it. The attorney explained that for
the last several decades estate tax laws required those
restrictions, but with the new laws, it was totally
permissible. Bob and Mary were thrilled and immediately
began planning to protect their lifetime of assets for
their needs and their family.
If you have questions,
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