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We talk all the time about the importance of getting to know the individuals and families we work with. Simply put, doing so helps us customize an estate planning strategy that fits their unique situation now, accounts for all family members, and is flexible enough to be modified as future circumstances and laws change. 

Perhaps there is no better way to drive our point home than share a specific estate planning case study.

(Obviously, client names and small details have been altered).

Bob is married to Betty. Betty is the primary beneficiary on Bob’s retirement plans, followed by their three kids. 

  • Bob, Jr. has a high-maintenance wife and is a successful doctor.  He is always concerned about the danger of being sued. Because Bob, Jr. is successful, there may be an estate tax when he passes away and leaves assets to his children and grandchildren. If Bob and Betty leave the retirement account to him outright, the money is vulnerable to those three things.
  • Jane is the middle child and has a problem marriage. Actually, her parents have more of a problem with her marriage than she does — they simply do not like or trust her husband. Their concern is that if Jane were to die, the husband would inherit the money by default. The same problem is true if they were to get divorced. On top of all this, Jane does not manage money very well.
  • Then there is Joe. Joe is the child who never quite gets anything right. He has filed for bankruptcy several times and is also very soft-hearted. In other words, he would likely give the money away he inherits. Clearly, Joe needs to be protected from himself. 

In this case, we recommend a Retirement Plan Trust. 

As I explain in my book, Who Gets Your Stuff When You Die, it is a mistake to think that your retirement accounts will remain asset-protected after you die. In a perfect scenario, they will go to a surviving spouse. But what happens if they are gone, too? What about kids? The short answer is that a lot can go wrong. Establishing a Retirement Plan Trust anticipates problems and protects your retirement accounts and the people you left them to.

So in Bob and Betty’s situation, we will first look at protecting the money they leave to their children from third parties or the federal government. We would also recommend requiring Jane and Joe to use Bob and Betty’s financial advisor to make sure they always have access to a professional to help them make the right financial decisions. 

  • From there, we will recommend that Bob, Jr.’s portion be left to him in the trust and that he be put in charge. With that said, the money is still protected if he gets divorced or sued, and we can protect it against a second estate tax. 
  • We will do the same thing for Jane, except that the trust will require her to use a financial planner. If she is really bad with money and thinks she cannot handle managing it, then we can put someone else in charge.
  • Some would think that it is only fair to put Joe in charge, too. But that is not a good idea. Instead, we will create three sub-trusts — one for each child — with different terms. Meanwhile, the Retirement Plan Trust is still active and protects the money over the 10 years and beyond.

A quick note about beyond the 10 years … 

Roth IRAs allow us as estate planning attorneys to protect retirement accounts beyond the 10 years and have the protections against losing the money to divorce, creditors, and lawsuits over the beneficiary’s lifetime without tax consequences. There are additional options that should be explored with a financial advisor for protection over a lifetime and for reducing taxes. But those can be covered in a future blog post. 

Call Leigh Hilton PLLC today!!

At Leigh Hilton PLLC, estate planning and elder law is all we do every single day. And we like to think we are very good at what we do. Furthermore, we try our very best to make the estate planning process as seamless and personable as possible. The first step is always to meet with you. The purpose of the initial meeting is actually to get to know you, your family, and your situation so that we can customize a plan based on your unique family situation. 

We have ample experience with wills and trusts and will take into consideration your particular situation. Proper planning of an estate, whether through a will, trust, or both, helps ensure your wishes are carried out. 

Leigh Hilton PLLC wants to be your first call every time for any estate planning need. We look forward to serving you.

Thanks for reading!

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