Please explain to me why most people work so hard to accumulate wealth and spend so little time protecting it for their family? It makes no sense.
I mean think about it. By the time you leave this world either you’ll be broke or you’ll leave assets – one or the other.
If you die broke, you don’t have to worry about your beneficiaries at least.
But if you die owning assets, why not take a few minutes (and in many cases, that’s all it takes) to make sure the people you love get what’s left?
Now, it’s true that you don’t know how much you’ll have left when you kick the bucket. So what?
If you plan now and die broke, nobody gets hurt.
If you die with assets and don’t plan, everyone (except the lawyers) lose.
Look. Even if you don’t have children or grandchildren, you want to protect your beneficiaries. You’ve worked too hard for your money to ignore this issue and let somebody else decide what happens to your treasure once you are gone.
I’ll tell you how to do that, but first, let me share a couple of stories with you.
I recently read an article about a grandfather (we’ll call him Bill) who left a large sum of money to his grandchildren but named his son Jerry as the trustee of the trust.
He also named Jerry the beneficiary because Bill figured as long as he told Jerry to spend the money for the kids’ education, he’d do it.
Sorry. Unfortunately, Jerry (the father of the grandchildren) thought it would be a good idea to spend that money on a vacation home rather than save it for the kids’ education.
It goes without saying that Jerry is a jerk. But Bill may have been an even bigger bozo than his son. Before I explain why, I need to give you some background.
How To Protect Your Family
If you want to leave a specific amount of money to a specific person for a specific purpose, one option is to set up a trust (for after tax money).
If you were in Bill’s situation, you could name the grandchildren as beneficiaries of the trust since they are the people who you want to benefit eventually. You also need to select a trustee — someone who will manage the assets as the trust spells out.
It’s pretty important to name a trustee you trust. Bill didn’t have to name Jerry as trustee.
Had Bill set up a the trust and thought about it a bit (using a lawyer or a self help legal service like Legal Zoom) Jerry never could have blown the bucks on a vacation home.
Bill knew that his son was irresponsible. Why did he name him as trustee?
Even if Jerry had been a good, trustworthy son, Bill’s trust should have spelled out exactly what the trustee could and could not do with that money. Then, if Jerry did something counter to his responsibilities, he’d be liable for it in a court of law.
So Bill had two chances to safeguard his grandchildren and he blew it. Am I being too harsh?
I do know that the world is full of “Jerrys” out there and you can’t do much about that. But you can do a lot to make sure those clowns don’t have a chance to play with your money — or ruin your family’s financial future.
So, talk to an attorney who specializes in estate tax. Think about who you want to leave assets to and who you want to protect those assets against.
A good attorney will draw up a plan that can probably take care of that. That will include language in the trust of course but it will also include how other assets are held and the beneficiary documentation on life insurance, annuities and retirement accounts.
Actually, when it comes to life insurance, annuities and retirement accounts you have to be extra alert. That’s because these investments all have beneficiaries and the money will go to those beneficiaries no matter what your trust or will says.
Make sure you go over each investment (including retirement assets) with your estate tax professional and get 100% clear on what you need to do in order to safeguard your family.
Once your attorney provides guidance, it’s super easy to make any required changes. Simply contact the institution, get a new beneficiary form, update it, keep a copy – and send in the original.
It’s really easy to blame someone else for being irresponsible. But it’s much more effective to look at myself and make sure I’ve done everything I can to fulfill my responsibilities — regardless of what others have done.
What say you? Have you set up a will or trust? Have you reviewed your beneficiary documents lately?