If the parents wanted to exercise more control over the distributions, they could creat a trust that allows the trustee to distribute trust income and principal from to a child for their health, education or maintenance, so long as they are living by the family’s values.  If a child gets into drugs, gambling or has other problems, the trustee can turn off the “spigot” and refuse to distribute assets from the lifetime trust until the child shapes up, cleans up and gets back on track.  Meanwhile, the trust allows the trustee to “redirect” the trust’s assets to assist the child by paying for the counseling, drug testing, therapy, etc. necessary to help the child get back on their feet.

 

The Rays included extensive guidelines and values for their children in each lifetime trust.  For instance, they directed that their trustee may assist a child by distributing income and/or principal out of a trust for:

 

·        A down payment towards purchasing and furnishing a home.

·       A down payment towards purchasing or establishing a business or professional practice.

·        Travel to foreign countries for cross-cultural experiences and education.

·        The reasonable expenses of a first wedding and honeymoon.

·        Expenses while a child’s a full-time student maintaining at least a 2.5 GPA.

·        Expenses while a child is pursuing an educational, scientific or charitable goal which is in the best interests of the child and the public, and which makes the child a productive member of society.

·        Living expenses if a child becomes disabled and is prevented from being a productive and self-supporting member of society.

·        Expenses or income replacement if a child is occupied in full-time caregiving for family members such as children or other relatives and that obligation precludes the child from earning a living (a stay at home parent, for example).

·        Supplemental income and expenses if a child is employed full time in an occupation to which he or she devotes at least 35-40 hours of work per week or is pursuing a career full time which is low-paying but socially productive, such as a missionary, teacher, artist or musician.

·        Any other extraordinary expense that is in the best interests of the child.

 

Additional language ensured that the trustee would consider the future probable needs of the child, and would help educate the child on the long-term tax advantages of retaining funds inside qualified plans, IRAs and such.

 

The Rays’ goal was to set up their estate plan so that the wealth left to their children would not be a burden or negative influence, but would provide a positive structure with incentives and directions to enable Jane and John to make the most out of their lives.  By using lifetime trusts with detailed instructions, values and guidelines, the Rays succeeded in protecting their hard-earned wealth from their children’s “inabilities, disabilities, creditors and predators” and have provided their children with invaluable guidance and financial support that will create a legacy to benefit their descendants for generations to come.

 

If you would like a copy of my new guide “Life-Care Planning for the Aging and those with Long-Term Illness”, email me at LHilton@dentonlawyer.com.  

Leigh Hilton, Attorney at Law
Sawko & Burroughs, P.C.
1100 Dallas Drive Suite 100
Denton, TX 76201
940 382-4357
LHilton@dentonlawyer.com

The information contained in this blog is for informational purposes only and is not legal advice. Nothing in this blog should be deemed to create or constitute an attorney-client relationship between any readers and this firm. An attorney-client relationship is created only when this firm agrees to represent someone and a written employment agreement or engagement letter is signed by both the client and attorney. In all cases, the reader should consult his or her own attorney for advice. The information in this blog is based on Texas law.