If you have a current estate plan that distributes your assets outright to your kids whether all at once at a certain age, or in stages, you’ve overlooked an incredibly valuable gift you can give your children (and the rest of your descendants for generations). This gift is an estate planning tool that only you can give them that, once you’ve died and left them their inheritance outright, is lost and cannot be reclaimed.
This gift will leave your children with a nest egg that is protected from lawsuits, divorce, and estate taxes. Additionally, it will save your family money at each generation.
If you don’t have an estate plan, and you have kids or other people you care about, contact us today and let’s get that handled for you.
The Problem: It's not about if, but when.
While you may think to yourself, my kids’ inheritance doesn’t need to be protected. They aren’t going to get sued. You may be right, but you may also be overlooking one of the most common “lawsuits” that causes inheritances to be lost every day, and that’s divorce.
As the divorce rates for first marriages sit at 40-50%, you hate to consider that happening to your children, there is a strong possibility that it could. If you want to protect the money you are leaving to your children from a (possible) future divorce, you can easily do so using a protected trust.
And, if your child is ever involved in a lawsuit, like a simple car accident or a bad business transaction, what you leave to your child can be protected from all future lawsuits or claims against him or her.
The best part is that if your child has his or her own taxable estate when he or she dies, your planning now could save your family 40 cents on every dollar (or more) handed down from one generation to the next.
As of 2023, the current federal estate tax rate is 40% -- meaning that every dollar passed on over the estate tax exemption rate is taxed at 40%. And it has been as high as 55%. On top of that, many states have estate taxes as well.
This all adds up fast, and can decimate your family’s financial legacy over time. For every million dollars you leave outright to your children, if your children have a taxable estate when they die, it could result in your grandchildren receiving only $550,000, with $450,000 unnecessarily going to the government.
The Solution
If you want to know that everything you’ve worked so hard to create will stay in your family for generations to come and not be lost to outsiders, leave your assets to your children in a Lifetime Asset Protection Trust. A Lifetime Asset Protection Trust, or LAPT, is a protected trust that can be easily built in to your existing estate plan or trust—just ask us for help.
With an LAPT, your children control what you leave them when you decide they are ready. After your death, the assets you leave behind will pass to your children and successive generations in a Trust that your child can control as the trustee of the trust. You can decide when your child is mature enough to act as a trustee.
As the trustee of the trust, your child decides how what you’ve left is invested and what to do with the trust assets and will even be able to determine the amount of control versus the amount of asset protection he or she wants based on his or her specific circumstances.
Is this still important if I don't have much money?
If you only leave your children a small amount of money to be invested and grown, this is still incredibly valuable for protection. Some might say it’s even more important because though your family has a lower balance to lose to taxes, lawsuits, and divorce each generation, the impact of such losses is much greater.
A mere $10,000 protected now can become millions for the people you love for generations to come.
Imagine that you leave just $10,000 to your child in a Lifetime Asset Protection Trust. Instead of spending that $10,000 or losing it in a divorce, they invest that $10,000 in creating their own business inside their trust, and then grow that business into a million dollar or multi-million-dollar venture because of how you chose to leave your child that fully protected $10,000 gift.
Secure the future of your family today by speaking to us. We review estate plans and inherited funds with you, ensuring that all legalities are in place so generations can enjoy the benefits according to your wishes. Don't wait, get peace of mind now - contact us today to get started.
This article is a service of Debbie Babb Law. We do not just draft documents. We ensure you make informed and empowered decisions about life and death for yourself and the people you love.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.