O ne in 20 physicians is sued annually. Each year, one in 25 people has a fire or theft in the home. One in nine people suffers from some type of auto accident or theft every year. To protect against the potentially devastating financial losses that any one of these scenarios might cause, it’s logical for doctors to have malpractice insurance, for homeowners to have insurance, and for drivers to have auto insurance. So why then, with more than 51% of marriages ending in divorce, do most physicians fail to plan for this possibility in order to protect themselves and their children? Optimism Abounds It’s fair to say that most people in general are optimists, so it’s difficult for any of us to think about worst-case scenarios. However, planning ahead before it’s too late can save a huge percentage of your assets. The goal of this article is not to show anyone how to cheat an ex-spouse out of any legal remedy or reasonable divorce settlement. Also, this article is not a pie-in-the-sky approach using pre-nuptial or post-nuptial agreements that no one ever agrees to sign. Rather, this article is going to show you how to protect any inheritance you receive from your parents and any inheritance you leave your children from divorce. In other words, “family money” will always remain family money. Divorce doesn’t have to have any negative impact on this. Most importantly, this planning can be done even if you or your children are already married — and you don’t need the consent of your spouse, the spouse of your children, or even your children. You can protect your children without them even knowing you’ve done so. Please consider the following points. Most Estates are Mistakenly Left as “Cash” If your parents leave you their estate outright, you will probably immediately own the property in your living trust, jointly with a spouse, in your own name in a community property state, or in your joint bank or brokerage account. As soon as you do this, you’re entitling your spouse to 50% of your inheritance from your parents if you get divorced. Your parents undoubtedly never intended for this to happen. When you got married, you either didn’t think your parents had money or knew they had money, but figured that your spouse would never marry you if you insisted on a pre-nuptial agreement. What Else Can You Do? You can advise your parents to leave their inheritance to an Irrevocable Trust with Spendthrift Provisions. This irrevocable trust is a separate legal entity. You and your siblings (if you have any) will be the beneficiaries of the trust. Your parents can spell out the terms under which you can use the assets in the trust. They can also appoint a trustee — who may be a family friend, trusted advisor, bank or professional trust company — who will make sure that the terms of the trust are followed. The terms can allow for the beneficiaries to receive money only after they achieve certain ages, complete a level of schooling, or perform certain tasks. The nice thing about the trust, with regard to your children, is that they don’t have to agree to any of the terms in the trust. Only you (and your spouse) have a say in how you leave the money to your children or grandchildren. As long as the funds in the trust remain in the trust, and not in the beneficiaries’ personal or joint accounts, those assets are not part of the marital estate. Therefore, your ex-spouse, or your child’s ex-spouse, is not entitled to any of the assets in the trust. How Much Does Divorce Protection Cost? Legal planning is similar to medical procedures (except of course, Medicare doesn’t reimburse the doctors 25% of what is billed) in that the price of the trust depends on the level of experience of the attorney and the complexity of the trust. Some trusts have separate sub-trusts for children, grandchildren, cousins, great-grandchildren, etc. Some trusts have very basic language and some have very different terms for each child for inheriting his/her money. In addition, the assets in the trust can affect the complexity of the trust. For example, a trust that owns shares of a closely held business or owns real estate assets may require more work to be done than a trust that only owns cash, stock and bonds. We compiled the following table as a guideline: If you consider that a few thousand dollars of additional estate planning could save hundreds of thousands or millions of unnecessarily lost family assets, the “bang for your estate planning buck” is quite high.
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Protecting Your Assets in Case of Divorce
O ne in 20 physicians is sued annually. Each year, one in 25 people has a fire or theft in the home. One in nine people suffers from some type of auto accident or theft every year. To protect against the potentially devastating financial losses that any one of these scenarios might cause, it’s logical for doctors to have malpractice insurance, for homeowners to have insurance, and for drivers to have auto insurance. So why then, with more than 51% of marriages ending in divorce, do most physicians fail to plan for this possibility in order to protect themselves and their children? Optimism Abounds It’s fair to say that most people in general are optimists, so it’s difficult for any of us to think about worst-case scenarios. However, planning ahead before it’s too late can save a huge percentage of your assets. The goal of this article is not to show anyone how to cheat an ex-spouse out of any legal remedy or reasonable divorce settlement. Also, this article is not a pie-in-the-sky approach using pre-nuptial or post-nuptial agreements that no one ever agrees to sign. Rather, this article is going to show you how to protect any inheritance you receive from your parents and any inheritance you leave your children from divorce. In other words, “family money” will always remain family money. Divorce doesn’t have to have any negative impact on this. Most importantly, this planning can be done even if you or your children are already married — and you don’t need the consent of your spouse, the spouse of your children, or even your children. You can protect your children without them even knowing you’ve done so. Please consider the following points. Most Estates are Mistakenly Left as “Cash” If your parents leave you their estate outright, you will probably immediately own the property in your living trust, jointly with a spouse, in your own name in a community property state, or in your joint bank or brokerage account. As soon as you do this, you’re entitling your spouse to 50% of your inheritance from your parents if you get divorced. Your parents undoubtedly never intended for this to happen. When you got married, you either didn’t think your parents had money or knew they had money, but figured that your spouse would never marry you if you insisted on a pre-nuptial agreement. What Else Can You Do? You can advise your parents to leave their inheritance to an Irrevocable Trust with Spendthrift Provisions. This irrevocable trust is a separate legal entity. You and your siblings (if you have any) will be the beneficiaries of the trust. Your parents can spell out the terms under which you can use the assets in the trust. They can also appoint a trustee — who may be a family friend, trusted advisor, bank or professional trust company — who will make sure that the terms of the trust are followed. The terms can allow for the beneficiaries to receive money only after they achieve certain ages, complete a level of schooling, or perform certain tasks. The nice thing about the trust, with regard to your children, is that they don’t have to agree to any of the terms in the trust. Only you (and your spouse) have a say in how you leave the money to your children or grandchildren. As long as the funds in the trust remain in the trust, and not in the beneficiaries’ personal or joint accounts, those assets are not part of the marital estate. Therefore, your ex-spouse, or your child’s ex-spouse, is not entitled to any of the assets in the trust. How Much Does Divorce Protection Cost? Legal planning is similar to medical procedures (except of course, Medicare doesn’t reimburse the doctors 25% of what is billed) in that the price of the trust depends on the level of experience of the attorney and the complexity of the trust. Some trusts have separate sub-trusts for children, grandchildren, cousins, great-grandchildren, etc. Some trusts have very basic language and some have very different terms for each child for inheriting his/her money. In addition, the assets in the trust can affect the complexity of the trust. For example, a trust that owns shares of a closely held business or owns real estate assets may require more work to be done than a trust that only owns cash, stock and bonds. We compiled the following table as a guideline: If you consider that a few thousand dollars of additional estate planning could save hundreds of thousands or millions of unnecessarily lost family assets, the “bang for your estate planning buck” is quite high.
O ne in 20 physicians is sued annually. Each year, one in 25 people has a fire or theft in the home. One in nine people suffers from some type of auto accident or theft every year. To protect against the potentially devastating financial losses that any one of these scenarios might cause, it’s logical for doctors to have malpractice insurance, for homeowners to have insurance, and for drivers to have auto insurance. So why then, with more than 51% of marriages ending in divorce, do most physicians fail to plan for this possibility in order to protect themselves and their children? Optimism Abounds It’s fair to say that most people in general are optimists, so it’s difficult for any of us to think about worst-case scenarios. However, planning ahead before it’s too late can save a huge percentage of your assets. The goal of this article is not to show anyone how to cheat an ex-spouse out of any legal remedy or reasonable divorce settlement. Also, this article is not a pie-in-the-sky approach using pre-nuptial or post-nuptial agreements that no one ever agrees to sign. Rather, this article is going to show you how to protect any inheritance you receive from your parents and any inheritance you leave your children from divorce. In other words, “family money” will always remain family money. Divorce doesn’t have to have any negative impact on this. Most importantly, this planning can be done even if you or your children are already married — and you don’t need the consent of your spouse, the spouse of your children, or even your children. You can protect your children without them even knowing you’ve done so. Please consider the following points. Most Estates are Mistakenly Left as “Cash” If your parents leave you their estate outright, you will probably immediately own the property in your living trust, jointly with a spouse, in your own name in a community property state, or in your joint bank or brokerage account. As soon as you do this, you’re entitling your spouse to 50% of your inheritance from your parents if you get divorced. Your parents undoubtedly never intended for this to happen. When you got married, you either didn’t think your parents had money or knew they had money, but figured that your spouse would never marry you if you insisted on a pre-nuptial agreement. What Else Can You Do? You can advise your parents to leave their inheritance to an Irrevocable Trust with Spendthrift Provisions. This irrevocable trust is a separate legal entity. You and your siblings (if you have any) will be the beneficiaries of the trust. Your parents can spell out the terms under which you can use the assets in the trust. They can also appoint a trustee — who may be a family friend, trusted advisor, bank or professional trust company — who will make sure that the terms of the trust are followed. The terms can allow for the beneficiaries to receive money only after they achieve certain ages, complete a level of schooling, or perform certain tasks. The nice thing about the trust, with regard to your children, is that they don’t have to agree to any of the terms in the trust. Only you (and your spouse) have a say in how you leave the money to your children or grandchildren. As long as the funds in the trust remain in the trust, and not in the beneficiaries’ personal or joint accounts, those assets are not part of the marital estate. Therefore, your ex-spouse, or your child’s ex-spouse, is not entitled to any of the assets in the trust. How Much Does Divorce Protection Cost? Legal planning is similar to medical procedures (except of course, Medicare doesn’t reimburse the doctors 25% of what is billed) in that the price of the trust depends on the level of experience of the attorney and the complexity of the trust. Some trusts have separate sub-trusts for children, grandchildren, cousins, great-grandchildren, etc. Some trusts have very basic language and some have very different terms for each child for inheriting his/her money. In addition, the assets in the trust can affect the complexity of the trust. For example, a trust that owns shares of a closely held business or owns real estate assets may require more work to be done than a trust that only owns cash, stock and bonds. We compiled the following table as a guideline: If you consider that a few thousand dollars of additional estate planning could save hundreds of thousands or millions of unnecessarily lost family assets, the “bang for your estate planning buck” is quite high.
