Trust or no Trust for your Heirs?
By: Martin M. Shenkman, CPA, MBA, JD
Do I Leave the Kids Money in Trust or Out Right?
Money Matters Radio – Estate Planning Checklist
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Introduction/Overview: If your kids are under same magical age, for some 21, others 25, perhaps 30, of course you leave the money to them in a trust under their will. Their young, perhaps not wise in the ways of the world, and so on. But what of an older child (heir)? Bottom line is that if there is meaningful amount of money (tough to define) trusts trump no trusts all the time. Why?
Consider the following items?
√ Divorce: 50% divorce rate. No trust. Child gets divorced. What are the odds that the money won’t be embroiled in a divorce suit and perhaps end up divided up. If the inheritance is in a trust it has a strong measure of protection.
√ Lawsuits: Remember what Shakespeare said about lawyers? How litigious is our society? In trust your life savings has protection. Out of trust it may become fodder for 1-800-SUE-THEM!
√ State Taxes: Live in a high tax state? State income tax rates are cresting over 10%! That’s bocu bucks! A trust that holds mere investment assets (not real estate or a business) might be able to be moved to a state with no or very low state income taxes and thereby minimize state tax until the kid/heir needs to withdraw income.
√ Controlling from the Grave: You don’t want to control from the grave? Well you gave Junior his good looks and genes how is this different? Is using a trust that protects what you leave really “controlling” or is it rather “empowering.” Get philosophical and think it through.
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