Beneficiary Controlled Trusts

Retirement, Income, Tax & Estate Planning.

Beneficiary Controlled Trusts

August 9, 2013 Newsletter Trusts 0

By Jeremy A. Wechsler, Esq., Your Estate Planning & Asset Protection Attorney

Asset protection is no longer for the super wealthy. In today’s world, consider how common the following events are: divorce, bankruptcy, foreclosure, lawsuits, creditor problems, addictions, special needs, and an inability to manage money properly. While you’re putting together your estate plan, you really ought to consider the possibility that any of the above could occur in your family. If you’re leaving an inheritance to a family member that may face one or more of these challenges, you have to consider asset protection tools in your estate plan. You never know what the future holds, but you can put in place a cost-effective plan to minimize these types of issues.

The key behind estate planning and asset protection is to not leave an inheritance ‘outright’ or directly to a beneficiary. Once you do that, the inheritance could be subject to all of those bad events above.

Beneficiary Controlled Trusts (BDT’s) are a flexible type of trust that can be built into your will that can provide moderate asset protection. They’re appropriate for beneficiaries of all ages. With a BDT, there is no reason to distribute all of the funds out of the trust by a certain age. Rather, the benefit of this trust is that the beneficiary keeps unused assets in the trust for as long as possible (or as long as you stipulate) and those assets inside the trust are better protected from bad events like the ones I listed above.

One objection that I hear often is that setting up a trust would be too complicated for the beneficiaries. Establishing a trust is not complicated, and the minimal amount of time and maintenance it takes is greatly outweighed by the benefit of asset protection.

Asset protection is something you can easily create for the beneficiary, and it’s important to be aware that the beneficiary generally cannot protect the assets once they’re distributed outright. While leaving your family members a generous gift, why not leave them a superior gift?