Host: What are some mistakes made with minor planning?
William Conway: Well, one of the biggest mistakes that people make in failing to plan is they haven t planned for minor children. Now, most everybody understands and knows that if they have minor children, that they would like to be able to pick the guardian, they would like to be able to pick the person who would raise the child. But a lot of people simply do not. Again, like Murphy s Law that which can go wrong, will. If both parents pass away, the child might be easily raised by somebody whose values or ideals of concepts are not in concert with the parents, somebody that they simply would not have selected. Moreover, they have not planned for minor children in terms of those resources going to these minor children. So, the resources going to the minor children without a plan will happen at age 18. 18 is not a very good age to give large sums of money to people aren t acquainted with wealth. We have all read circumstances, perhaps people even seen or experienced in their own families, events that have occurred, circumstances that have happened with sudden wealth being given to people who are unable to handle it. So, planning for minor children is a major component of planning. A will base plan although, it is not something that we generally subscribe to as the best form of planning, it is certainly going to at least begin to address that particular problem. It will be able to name the guardian of the child. When we do trust planning, we actually use a will as a what we call a pour-over will to not only catch assets that are transferred to that have not yet been transferred the trust, but also we would use a will to select or direct to whom the person or persons that would be the guardian for that minor child.
Host: What other protections does a trust give?
William Conway: Well, beyond the protection of the assets for the surviving spouse and the circumstances surviving spouse remarries and if that remarriage is unsuccessful, so there is protection against that spouse s subsequent divorce. There is also protection of course, as we mentioned against asset on disinheritance of the children. But beyond that there are some protections that only trusts give or afford and that is asset protection. Sometimes, as people are engaged in certain activities, perhaps someone is a physician or perhaps is in some other profession which might cause them to be sued, the assets that would be left by one spouse to another and subsequently, when those assets are left to the children, they can be asset protected from the ravages of law suit and the reason that is the case is because a trust or the assets of the trust do not actually belong to the beneficiary in that case of surviving spouse. Since they actually do not belong to the beneficiary and because there are subsequent beneficiaries of the trust meaning usually, the children of the marriage, the affect of that would be that a litigant who might be trying to pursue a law suit against the surviving spouse will even if successful, not be able to reach the assets in the trust. So, it provides a substantial and beneficial amount of asset protection for the surviving spouse. In addition, as I mentioned, that protection can be moved on a generation. So, if there is a obstetrician who is one of the children or if there is a real estate developer who is one of the children, these assets can be protected from creditors that might emerge or from the deed of divorce they may subsequently have. Then of course, there is the additional protection that a trust affords to avoid federal taxation to be able to utilize the full amount of the federal exemption, sometimes what we call making sure that we are using the coupon.