Year End Estate Planning Tip #3 – Check Your Mental Disability Plan

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is making sure their mental disability plan is up to date.

Three Areas of Your Mental Disability Plan That Are Likely Out of Date
If your estate plan is more than a few years old, then your mental disability plan is likely out of date for the following reasons:

1. Are your health care directives compliant with HIPAA? While the federal Health Insurance Portability and Accountability Act (known as “HIPAA” for short) was enacted in 1996, the rules governing it were not effective until April 14, 2003. Thus, if your estate plan was created before then and you have not updated it since, then you will definitely need to sign new health care directives (Living Will) so that they are in compliance with the HIPAA rules. With that said, it’s possible that health care directives signed in later years lack HIPAA language, so check with your estate planning attorney just to make sure that your estate plan documents reference and take into consideration the HIPAA rules.

2. Is your Power of Attorney stale? How old is your Power of Attorney? Banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old. This means that if you become incapacitated, your agent could have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. Aside from this, Pennsylvania has enacted new laws governing Powers of Attorney, which become effective on January 1, 2015. If you want to increase the likelihood that your Power of Attorney will work without any hitches if you lose your mental capacity, update and redo your Power of Attorney every few years so that it doesn’t end up becoming a stale and useless piece of paper.

3. Does your estate plan adequately address mental disability? A will is something that only becomes effective when you die. With today’s longer life expectancies come increased probabilities that you will be mentally incapacitated before you die. A fully funded Revocable Living Trust is the best way to provide adequately for mental incapacity, but some older trusts do not. If you signed your Revocable Living Trust more than 8 to 10 years ago and haven’t updated it since or have assets that are outside your Revocable Living Trust, then it may well lack modern and appropriate provisions for what to do with you and your property if you become mentally incapacitated. Have your estate plan checked to ensure that it will work effectively and efficiently if you lose your mental capacity. Otherwise you and your loved ones may end up in front of a judge who will have to sort out your financial matters – at horrendous cost.

What Should You Do?
Estate planning is about much more than having a plan for who gets your stuff after you die – it should also include having a plan for what happens in case you lose your mental capacity. If your plan is more than a few years old or does not include a fully funded Revocable Living Trust, then chances are it lacks a good mental disability plan. Now is the time to meet with an experienced estate planning attorney to ensure that you have a mental disability plan that will work the way you expect it to work if it’s ever needed.

Eight Reasons – NOT – to have an estate plan.

If this one is too long for you, by all means, skip directly to number 8!!

1. You enjoy paying taxes. Maybe you believe that giving 40+% of your life savings to the government is a good use of that money. Your family can probably live on the fraction of your money left over.

Most people have heard that the federal estate tax exemption is over $5 million ($5.34 in 2014 and $5.43 in 2015). So, if your estate is comfortably under that there will be no tax consequences, right? Pennsylvania has an inheritance tax that is separate from the federal estate tax (see #2 below for more on this)*. Also, if you have a appreciated assets or a retirement plan and your heirs cash it out, it could have disastrous capital gains and/or income tax consequences.

2. You believe that State representatives know how to plan your estate better than you do. You voted to elect these officials, so why not let them make laws that will distribute your estate.

In Pennsylvania, if you’re married with children and you die without your own estate plan, the government has decided how your estate will be distributed. So, let’s say your two kids are 3 years old and 1 years old, respectively. Under the law, the first $30,000 goes to your spouse. Then the balance is divided 50/50 between your spouse and your children. You want your minor children to get 50% of the balance of your estate immediately, right?

*The 50% that passes to your children will be subject to Pennsylvania Inheritance Tax. There will be no inheritance tax owed on the first $30,000 and 50% of the balance that goes to your spouse. Wouldn’t it be better if 100% of your estate was not subject to inheritance tax, which would give your spouse that much more money to take care of your children?

3. Your minor children will be in good hands with a state agency.   You don’t need to name a guardian for your children. The Department of Children and Youth Services will be fine.

Avoid this. If for no other reason, make an estate plan to name guardians for your children.

4. You don’t want to have any say in how your spouse and children use their inheritance, they can just have it and enjoy it.

Your spouse and children will enjoy their inheritance a lot more if you have a plan to preserve assets for them and protect those assets from creditors, predators, and the heirs themselves. With an estate plan, you can protect your assets from the bad things in the world and make sure they are available to your loved ones.

General Needs Trusts, Special Needs Trusts, Retirement Trusts, Generation Skipping Trusts, Asset Protection Planning, Charitable Planning, and Business Succession Planning can all be accomplished by putting a comprehensive estate plan in place.

5. You’ll just make all your accounts and real estate joint with your kids. Why should you have an estate plan when you can just do this?

Adding your children as joint owners of bank accounts and real estate can cause serious issues such as: gift tax consequences, capital gains tax issues, and subjecting all of your assets to your children’s creditors. This is also problematic with regard to Pennsylvania’s Inheritance Tax laws.

6. You made a will 20 years ago and just wrote in the changes you wanted to make.

Making any marks on your will can invalidate the will or make it inadmissible in whole or in part to probate. At the very least, it will complicate matters with the probate court and could lead to disharmony in the family.

Avoid probate altogether with a living trust. Probate is a very public affair. Anyone can get a copy of your will from the probate court. The probate process takes at least 12 months to complete, and can incur hefty legal fees.

Maintain privacy and family harmony by having a trust in place that passes your property outside of the probate court.

7. You don’t have a lot of money and own very few assets, so why bother?

Estate planning is not just for the rich. Estate planning is not just about death. Estate planning is as much about lifetime planning as it is about wealth transfer on death:

  • Incapacity/Disability Planning
  • Health Care Powers of Attorney
  • Durable General Powers of Attorney
  • Living Wills
  • HIPAA Authorizations
  • Guardian Designations

8. You don’t plan on dying anytime soon.  

I hear this one a lot. Here’s my counteroffer: Estate planning is not about dying; it’s an act of love. You make an estate plan because your loved ones need you to. Put a plan in place for your loved ones. You’ll feel good about doing it and they’ll be taken care of.

 

Year End Estate Planning Tip #2 – Check Your Beneficiary Designations

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is their beneficiary designations.

Have You Checked Your Beneficiary Designations Lately?

Do you own any life insurance policies? If so, have you named both primary and secondary beneficiaries for your policies?

How about retirement accounts – are any of your assets held in an IRA, 401(k), 403(b) or annuity? Or how about a payable on death (“POD”) or a transfer on death (“TOD”) account? If so, have you named both primary and secondary beneficiaries for these assets?

What about your vehicle – do you have it registered with a TOD beneficiary? And your real estate – is it held under a TOD deed or beneficiary deed?

If you have gotten married or divorced, had any children or grandchildren, or any of the beneficiaries you have named have died or become incapacitated or seriously ill since you made beneficiary designations, it is time to review them all with your estate planning attorney.

Beneficiary Designations May Overrule Your Will or Trust

Speaking of estate planning attorneys, has yours been given and reviewed all of your beneficiary designations?

It is critically important for your estate planning attorney to review your beneficiary designations as your life changes because your beneficiary designations may overrule or conflict with the plan you have established in your will or trust. Also, naming your trust as a primary or secondary beneficiary can be tricky and should only be done in consultation with your estate planning attorney.

What Should You Do?
Whenever you experience a major life change (such as marriage or divorce, or a birth or death in the family) or a major financial change (such as receiving an inheritance or retiring) or are asked to make a beneficiary designation, your beneficiary designations should be reviewed by your estate planning attorney and, if necessary, updated or adjusted to insure that they conform with your estate planning goals.

If you have gone through any family or monetary changes recently and you’re not sure if you need to update your beneficiary designations, then consult with your estate planning attorney to ensure that all of your bases are covered.

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Celebrity Wills – Philip Seymour Hoffman’s Will: 3 Critical Mistakes

Oscar-winning actor Philip Seymour Hoffman died from a drug overdose in February 2014. Sadly, he left behind three young children – and a fortune estimated to be worth $35 million.

He was only 46.

After his death, Mr. Hoffman’s Last Will and Testament was filed for probate.

  • The Will is short – only 15 pages – and, it was signed on October 7, 2004, about a year and a half after the actor’s first child was born.
  • The Will leaves his entire estate to Marianne “Mimi” O’Donnell, a costume designer and the mother of all three of Mr. Hoffman’s children.
  • The couple never married and had separated in 2013 (due to Mr. Hoffman’s recurring drug problems).

Estate Planning Mistake #1 – Using a Will

Shortly after Mr. Hoffman’s Will was filed, The New York Post published it online and his final wishes instantly became public information.

  • We know his request to have his son (the only child living when the Will was signed) raised in Manhattan, Chicago, or San Francisco so that he “will be exposed to the culture, arts and architecture that such cities offer.”
  • There is another way – a private way. A Revocable Living Trust (as used by Elizabeth Taylor and Paul Walker) would have kept Mr. Hoffman’s final wishes a private matter.

Estate Planning Mistake #2 – Failing to Update His Estate Plan

Mr. Hoffman signed his Will in October 2004.

  • During the next nine years, he had two daughters, won an Oscar for best actor for his performance in Capote, and amassed the majority of his fortune.
  • Considering Mr. Hoffman’s well-documented, long-term struggle with drug addiction as well as the significant changes in his life and net worth during those nine years, it is surprising that he failed to update his estate plan.
  • At the very least, your estate plan should be reviewed every few years to insure that it still does what you want it to do and takes into consideration changes in your finances, your family, and the law.

Estate Planning Mistake #3 – Ignoring a Trusted Advisor

In probate court documents filed in July, it was revealed that Mr. Hoffman’s accountant repeatedly advised him to protect his children with a trust fund. But the actor ignored this good advice.

  • With the terms of the old 2004 Will left unchanged, the estate will pass to Mr. Hoffman’s estranged girlfriend, outright and without any protections.
  • Nothing will go directly to his children.
  • Had Mr. Hoffman listened to his accountant and worked with an estate planning attorney, he could have established a lasting legacy for his children, protecting them and their inheritances.

With the counseling and advice of an experienced estate planning attorney, you can avoid mistakes like Mr. Hoffman’s.

Discretionary Trusts – How to Protect Your Beneficiaries From Bad Decisions and Outside Influences

Leaving your hard-earned assets outright to your children, grandchildren or other beneficiaries after you die will make their inheritance easy prey for creditors, predators, and divorcing spouses. Instead, consider using discretionary trusts for the benefit of each of your beneficiaries.

What is a Discretionary Trust?

A discretionary trust is a type of irrevocable trust that is set up to protect the assets funded into the trust for the benefit of the trust’s beneficiary. This can mean protection from the beneficiary’s poor money-management skills, extravagant spending habits, personal or professional judgment creditors, or divorcing spouse.

Under the terms of a typical discretionary trust, the trustee is limited in how much can be distributed to the beneficiary and when the distributions can be made. You can make the terms and time frames as limited or as broad as you want. For example, you can provide that distributions of income can only be made for health care needs after the beneficiary reaches the age of 21, or you can provide that distributions of income and principal can be made for health care needs and educational expenses at any age.

An added bonus of incorporating discretionary trusts into your estate plan is that the trusts can be designed to minimize estate taxes as the trust assets pass down from your children to your grandchildren (this is referred to as “generation-skipping planning”). In addition, you can dictate who will inherit what is left in each beneficiary’s trust when the beneficiary dies, which will allow you to keep the trust assets in the family.

While the distribution choices that can be included in a discretionary trust are virtually endless (within certain parameters established under bankruptcy and creditor protection laws), the bottom line is that a properly drafted discretionary trust will protect a beneficiary’s inheritance from creditors, predators, and divorcing spouses, avoid estate taxes when the beneficiary dies, and ultimately pass to the beneficiaries of your choice.

Where Should You Include Discretionary Trusts in Your Estate Plan?

Discretionary trusts should be included in all of the trusts you have created that will ultimately be distributed to your heirs, including:

• Your Revocable Living Trust
• Your Irrevocable Life Insurance Trust
• Your Standalone Retirement Trust

What Should You Do?

If you are concerned that your children, grandchildren, or other beneficiaries will not have the skills required to manage and invest their inheritance or will lose their inheritance in a lawsuit or divorce, then talk to your estate planning attorney about how to incorporate discretionary trusts into your estate plan.

Why Does Probate Take So Long?

Probate can be easily avoided, but most estates are dragged through the process. Why? Many people fail to create an estate plan, so probate is required. And – others plan with just a Will, so probate is required. As a result, assets end up at the mercy of the court system, open to public scrutiny, and delayed passing to beneficiaries.

Frustratingly, probate can drag on for months – or even years. Here are some of the most common reasons why probate takes so long:

1. Many Beneficiaries. In general, estates with many beneficiaries take longer to probate than estates with just a few beneficiaries.

Why? It takes time to communicate with each and every beneficiary and, if documents need to be signed, there are always beneficiaries who fail to return their signed documents in a timely manner. Regardless of advances in modern technology and communications, it simply takes a long time to reach multiple beneficiaries, spread out across the United States or in a foreign country.

2. Estate & Inheritance Tax Returns. Estates are required to file an inheritance tax return in the Commonwealth of Pennsylvania. And, Estates required to file an estate tax return at the federal level are usually complicated. The personal representative can’t make a final asset distribution until she is absolutely sure that the state inheritance tax return and the federal estate tax return have been accepted and the inheritance/estate tax bill(s) has/have been paid in full. At the federal level, it can take up to a year before the IRS gets around to reviewing and accepting an estate tax return.

3. Angry Beneficiaries. Nothing can drag out the probate process like a family feud. When beneficiaries don’t get along or won’t speak to each other, the personal representative may be forced to go to court to get permission to do just about everything. That takes time.

4. Incompetent Personal Representative. A personal representative, who is not good with money, irresponsible, disorganized, or busy with his job or family, will drag probate on and on. Why? Because a personal representative must efficiently and effectively handle the responsibilities and duties that go along with serving. It’s a lot of work.

What Can Be Done to Speed Up Probate?
The best way to speed up probate is to avoid it altogether. Avoidance is the only way to eliminate probate delays. If properly drafted and funded, a Revocable Living Trust will avoid probate perils, stresses, and delays.

Aligning Insurance Products within a Planning Structure

We use a variety of insurance products to manage risk in different areas of our lives in order to protect our wealth from losses that can come from property damage, businesses we own, disability, retirement and death. Instead of considering these products as separate items, make them part of an integrated, overall risk management plan.

The Key Takeaways
• A variety of insurance products are used to help manage risk and protect wealth.
• The best results occur when separate insurance products are part of an integrated plan.

Different Kinds of Insurance for Different Risks
Most insurance can be grouped in these general categories.

Property: This would include insurance on automobiles and other vehicles; home, furnishings, jewelry and artwork, and personal liability insurance.

Business: Business owners need insurance on a building they own, office equipment and computers, as well as liability, worker compensation, errors and omissions insurance, and so on.

Health and Disability: Disability income insurance replaces part of your income for a certain length of time if you should become ill or injured and unable to work. Health insurance helps to pay for medical services received. Long-term care insurance helps to pay for extended care that is not covered by most health insurance or Medicare.

Retirement: Annuities and other insurance products can help replace income after retirement.

Estate Planning: Life insurance is often used to replace an earner’s income; to pay funeral expenses, debts and taxes; to fund family and charitable trusts; to fund a business buyout and compensate the surviving owner’s family; and to provide an inheritance to family members who do not work in a family business.

What You Need to Know
Remember, insurance is for risk management—to protect your wealth from potential areas of loss. If a risk is no longer there (the exposure ends or you are able to self-insure and cover the risk yourself), then the insurance coverage for that risk can be eliminated.

Actions to Consider
• Trying to coordinate your insurance and manage your risk yourself is a daunting task. Instead, work with a team of advisors who have the knowledge and experience to help you make sure your risks are covered at the appropriate levels, without duplication and unnecessary costs.
• An advisory team will usually include your financial investment advisor, estate planning attorney, and life, health and property/casualty insurance agent(s). Other members may be added to this team as needed. You will probably find that your advisors will welcome the opportunity to work on your team, because they want to provide you and your family with the best possible service and solutions.

U.S. Supreme Court Rules Inherited IRAs are Not Protected from Creditors

On June 12, 2014, the U.S. Supreme Court—in a unanimous decision—ruled that Individual Retirement Accounts (IRAs) inherited by anyone other than a spouse are not retirement funds and therefore are not protected from the beneficiary’s creditors in bankruptcy.

The reasoning is, because the beneficiary cannot make additional contributions or delay distributions until retirement, it is not a retirement account. There is, in fact, nothing to prevent a beneficiary from withdrawing funds, or even clearing out the account, at any time. As a result, these funds must also be available to satisfy the beneficiary’s creditors during bankruptcy. Following the same logic, an inherited IRA is also subject to divorce proceedings.

This is not great news for parents who have planned to leave large IRA accounts to their children or grandchildren, with the desire to continue the tax-deferred earnings for many more years over their lives.

Fortunately, there is a solution. By using a trust as the beneficiary of the IRA, you can continue the tax-deferred earnings over a beneficiary’s life expectancy and protect your hard-earned savings from the beneficiary’s creditors.

The Key Takeaways
• Inherited IRAs are not protected from the beneficiary’s creditors in bankruptcy.
• Using a trust as beneficiary can continue the tax-deferred earnings over a beneficiary’s life expectancy and protect these savings from the beneficiary’s creditors.

Using a Trust as Beneficiary of an IRA
Using a trust as beneficiary of an IRA or retirement plan account will let you use the oldest beneficiary’s life expectancy to stretch out the tax-deferred growth. It will let you keep control over when the beneficiary receives distributions, and can protect the asset from the beneficiary’s creditors (including bankruptcy), predators (those who may have undue influence on the beneficiary), irresponsible spending, and divorce proceedings. You can even provide for a beneficiary with special needs without jeopardizing government benefits.

In order for the trust to qualify, it must meet certain requirements, including that a) it must be valid under state law; b) it must be irrevocable not later than the death of the owner; c) all beneficiaries of the trust must be individuals (no charities or other non-persons) and they must be identifiable from the trust document; and d) a copy of the trust document must be provided to the account custodian by a certain date.

Because the trust’s oldest beneficiary’s life expectancy must be used to determine the distributions, many people opt for a separate share for each beneficiary or even a separate trust for each beneficiary. These are called “stand alone retirement trusts” because they are created solely for retirement plan and IRA assets. (A revocable living trust would still be used for other general estate planning purposes.)

What You Need to Know
Planning for IRAs and other tax-deferred savings plans is not something to be taken lightly and not a task to try to master yourself. The laws are complicated, and a simple mistake can be disastrous and irreversible. Because there is often a lot of money involved with these plans, it pays to work with an estate planning attorney who has considerable experience in this area.

Important Notes
• A conduit trust requires that all distributions from the IRA or retirement plan must be distributed to the trust’s beneficiary(ies). (The trust is simply a “conduit” from the plan to the beneficiary.) These distributions are not protected from a beneficiary’s creditors and have no asset protection.
• With an accumulation trust, the distributions may be kept within the trust instead of being distributed to the beneficiary. Assets that remain in the trust are protected from the beneficiary’s creditors, but any undistributed income kept in the trust will be subject to higher income tax rates than what an individual would pay on the same amount.
• A “trust protector” can be given the power to change the trust from a conduit to an accumulation trust. This can be valuable if there is a change in the beneficiary’s circumstances (due to disability, drug problems, etc.), making it advantageous to keep the distributions in the trust.
• Your attorney will be able to suggest the best combination of beneficiary designations for both the IRA or retirement plan and your Trust(s). Having these options will let your beneficiaries make good decisions based on the circumstances at that time. For example, if your spouse is in ill health when you die, it may make sense for your spouse to disclaim an IRA so that your children can inherit it and have distributions paid over their longer life expectancies.

Take Action
It is essential that you take action to ensure that your IRA can’t be seized by your beneficiaries’ creditors. Call our office now to schedule an appointment. We’ll get you in as soon as possible and analyze whether a Standalone Retirement Trust is appropriate to protect both your beneficiaries and your assets.

How to Leave Assets to Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children’s trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).

How to Leave Assets to Adult Children

When considering how to leave assets to adult children, the first step is to decide how much each one should receive. Most parents want to treat their children fairly, but this doesn’t necessarily mean they should receive equal shares of the estate. For example, it may be desirable to give more to a child who is a teacher than to one who has a successful business, or to compensate a child who has been a primary caregiver.

Some parents worry about leaving too much money to their children. They want their children to have enough to do whatever they wish, but not so much that they will be lazy and unproductive. So, instead of giving everything to their children, some parents leave more to grandchildren and future generations through a trust, and/or make a generous charitable contribution.

When deciding how or when adult children are to receive their inheritances, consider these options.

Option 1: Give Some Now

Those who can afford to give their children or grandchildren some of their inheritance now will experience the joy of seeing the results. Money given now can help a child buy a house, start a business, be a stay-at-home parent, or send the grandchildren to college—milestones that may not have happened without this help. It also provides insight into how a child might handle a larger inheritance.

Option 2: Lump Sum

If the children are responsible adults, a lump sum distribution may seem like a good choice—especially if they are older and may not have many years left to enjoy the inheritance. However, once a beneficiary has possession of the assets, he or she could lose them to creditors, a lawsuit, or a divorce settlement. Even a current spouse can have access to assets that are placed in a joint account or if the recipient adds the spouse as a co-owner. For parents who are concerned that a son-or daughter-in law could end up with their assets, or that a creditor could seize them, or that a child might spend irresponsibly, a lump sum distribution may not be the right choice.

Option 3: Installments

Many parents like to give their children more than one opportunity to invest or use the inheritance wisely, which doesn’t always happen the first time around. Installments can be made at certain intervals (say, one-third upon the parent’s death, one-third five years later, and the final third five years after that) or when the heir reaches certain ages (say, age 25, age 30 and age 35). In either case, it is important to review the instructions from time to time and make changes as needed. For example, if the parent lives a very long time, the children might not live long enough to receive the full inheritance—or, they may have passed the distribution ages and, by default, will receive the entire inheritance in a lump sum.

Option 4: Keep Assets in a Trust

Assets can be kept in a trust and provide for children and grandchildren, but not actually be given to them. Assets that remain in a trust are protected from a beneficiary’s creditors, lawsuits, irresponsible spending, and ex- and current spouses. The trust can provide for a special needs dependent, or a child who might become incapacitated later, without jeopardizing valuable government benefits. If a child needs some incentive to earn a living, the trust can match the income he/she earns. (Be sure to allow for the possibility that this child might become unable to work or retires.) If a child is financially secure, assets can be kept in a trust for grandchildren and future generations, yet still provide a safety net should this child’s financial situation change.