Continuing the discussion of the 7 Major Errors in Estate Planning, a recent article written for Forbes, leads me to the seventh error –
Leaving Assets Outright to Adult Children
When an individual creates a trust, they will be asked by the estate planning attorney how the trust assets are to be distributed to the beneficiaries. For many individuals with adult children who will be the beneficiaries of the trust estate, the answer is simply to have the trust make outright distributions to the adult child. This choice may lead to some unintended consequences. Most assets held in an individual’s name may be subject to the claims of a judgment creditor. Living in a litigious society, we often contemplate ways to protect those assets which not only we earn during our life but pass on to our beneficiaries upon death. An effective approach to protecting those assets passed on to our beneficiaries upon death is by creating a trust in which the assets remain in trust, even for adult children, for as long as the laws of the state will allow primarily for purposes of asset protection. If held in trust, the assets will be available to the beneficiary while being protected within the “walls” of the trust.