Situation: Sam, a 28-year-old technology start-up owner, is recently divorced with a two-year-old child. Sam wants to ensure that he leaves his parents with enough money to enjoy their retirement and elder years, that whomever cares for his son has financial means of support, and that his brother receive a significant cash gift.
Solution: Believe it or not, Sam’s goals can be accomplished with a relatively simple testamentary trust. As opposed to a living trust that starts now and continues beyond Sam’s life, a testamentary trust is created upon Sam’s death. Aside from that, you can accomplish pretty much the same things in either vehicle.
A proper guardian was named for Sam’s son, and that she will receive a significant portion of Sam’s life insurance proceeds to use only for the child’s health, education, maintenance, or support. Any money remaining when Sam’s son turns 25 would be turned over to the child’s control.
A life interest in trust was created for Sam’s parents. So long as they are alive and capable, they would receive a portion of the fund’s interest throughout their lifetime, and could take from the principal for their health and support. Should either pass away, the remaining monies would go to Sam’s brother. Not only does this keep the money in the family, it helps shield it from any of Sam’s parents’ creditors.
Because Sam is relatively young, he has his prime asset accumulation years ahead. Once he purchases a house, or if he gets remarried, we’ll look into moving toward a living trust. But for now, Sam’s goals are accomplished.
To find out about other solutions for situations similar to Sam's or for your own unique situation, contact Legatum Law today.
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