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Trusts better robust than bust
1. Trusts – Better Robust Than Bust
Not all trusts are created equal, especially when it comes to protection in a divorce.
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2. The point of leaving money in a trust is to ensure that it’s
available to the beneficiary at the right time, with maximum tax
deferral, and protected from both creditors and the beneficary’s
mishandling of the assets (particularly if the beneficiary is a
minor). One common reason for leaving funds in a trust is to
protect them in case the beneficiary divorces, but not all trusts
provide adequate protection from asset loss in divorce. A
poorly-designed trust is often the weak link in NY estate
planning.
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LAW OFFICE OF DAVID PARKER BLOG
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3. According to a recent article in Financial Planning, The two
most common mistakes made about trusts is to keep them
simple and to keep control in the hands of the beneficiary. A
typical trust will distribute the funds to the beneficiary free and
clear upon reaching a certain age, typically 21, sometimes 25 or
30. Often the beneficiary is given a degree of control over the
funds and can disperse them to maintain a lifestyle. While this
is enough to keep the funds protected until the child is old
enough to handle them responsibly, it is not enough to keep
them protected in the case of divorce.
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LAW OFFICE OF DAVID PARKER BLOG
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4. For that purpose, the funds should be kept secure for as long as
possible, and protected from the beneficiary’s own discretionary
control. Otherwise, they could be assessed for any number of
purposes by a court: distribution as community property in a
divorce, or child support, depending on the circumstances and
the exact provisions in the trust itself. The original article
should be consulted for details.
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LAW OFFICE OF DAVID PARKER BLOG
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5. It’s always a trade-off, of course. The less control the
beneficiary has over the trust funds, the less enjoyment and
responsibility and, in general, ownership he or she will have. At
the same time, a more restricted trust (particularly one that does
not have discretionary provisions for income maintenance) will
be better protected from legal claims. For those whose main
concern is New York asset protection, that is the stronger and
more important consideration.
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LAW OFFICE OF DAVID PARKER BLOG
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6. Law Office of David Parker
Estate Planning and Elder Law
www.parkertrustlaw.com
