If you already have an estate plan in place, chances are, you’ve planned to distribute your assets directly to your children by the time they reach 35, or perhaps slightly later. I encourage you to revisit your estate plan and verify its current stipulations.
If you do have a plan and it distributes your assets outright to your kids — even in stages, over time, some at 25, then half of what’s left at 30, and balance at 35 (or something along those lines), you’ve overlooked an incredibly valuable gift you can give your children (and the rest of your descendants for generations); a gift that only you can give them. And a gift that, once you’ve died and left them their inheritance outright, is lost and cannot be reclaimed.
Leave your kids a nest egg protected from lawsuits, divorce, and estate taxes.
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. If you want to protect the money you are leaving to your children from their future divorces, even if you love their spouses now or expect you will, in the future, you can easily do so using a protected trust.
And, if your child is ever involved in a lawsuit, for example, a simple car accident, or if a business transaction goes bad, what you leave to your child can be protected from all future lawsuits or claims against them.
The best part is that if your child has their own taxable estate when they die, your planning now could save your family 40 cents on every dollar (or more) handed down from one generation to the next.
Save your family Up to 40 cents on every dollar — currently — at each generation.
As of 2023, the standing federal estate tax rate is at 40%. This means that each dollar bequeathed above the estate tax exemption limit is taxed at 40%, and it’s been as high as 55% in the past. Additionally, several states levy their own estate taxes, Illinois is one of them.
These taxes accumulate quickly and can significantly erode your family’s financial legacy over time. For every million dollars you leave outright to your children, if they have a taxable estate at their passing, your grandchildren could end up receiving just $550,000, with the other $450,000 unnecessarily going to the government.
Therefore, if you wish to ensure that everything you’ve tirelessly worked for stays within your family for future generations and doesn’t end up in the hands of outsiders, it’s recommended to leave your assets to your children in a trust – what we refer to as a Lifetime Asset Protection Trust – instead of leaving it to them outright. This trust can be easily incorporated into your existing estate plan or trust. You just need to consult with us to facilitate the addition of a Lifetime Asset Protection Trust into your plan.
But how will my kids get to use what I leave to them?
Here’s the best part about leaving your assets to your children in a Lifetime Asset Protection Trust. Not only is what you leave protected, but 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 your grandchildren, great-grandchildren, and so on for 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 your child will even be able to determine the amount of control vs. 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, this is still incredibly valuable for protection, if you are leaving assets that will be invested and grown, and not just spent right away on consumables. Some might say it’s even more important because your family has less to lose to taxes, lawsuits, and divorce each generation. And 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, and 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 $10,000 gift … and it’s fully protected for generations.
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.