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November 1, 2012

A primary motivation in estate planning is leaving to our beneficiaries, the assets we have accumulated over a lifetime. Clients focus on the monetary value of inheritance, most seeking equal treatment for their beneficiaries, some wishing unequal treatment or disinheritance of some, and most concerned about having their wishes respected and carried out.

Very few of our clients have gone beyond this to consider how an inheritance can be used to further their non-monetary objectives for the recipients. What do I mean by this? Let me share some examples.

I had a client who considered a staged distribution of his assets, 1/3 to his children at the ages of 25, 30 and 35. “No,” he said, “that’s not what I want. While I’ve had good jobs all my life, and made good money, I haven’t saved near enough for my retirement. I don’t want my kids, when they approach retirement age, to be in the spot I’m in right now.” He then proceeded to instruct me to prepare his trust permitting his children to withdraw their inheritance in thirds, 1/3 each at 25, 30 and 65. I thought that was a very creative approach.

We have other clients who want to make sure that their children and grandchildren stay in touch and spend time together, even though our modern society tends to send them in different directions as they pursue their careers. Hence the “Travel Trust.” These parents have created a trust providing children with some withdrawal rights, but also provided a portion of the inheritance is to be held and used by family members as a travel fund, providing cash advances to purchase travel tickets, meals and accommodations, perhaps even car rentals, to facilitate travel to visit other family members. In the case of a beneficiary with physical challenges, travel costs might also include travel costs of a needed companion for the principal beneficiary. Some Travel Trusts provide for the same sorts of disbursements in aid of travel for personal growth experiences like visits to famed destinations, perhaps art museums in France, or the pyramids in Egypt. They might go so far as to require the beneficiary to study or take courses in a particular country.

Some who provide money for travel want their descendants to visit the country of family origin, culture or religion. Other trusts encourage travel with a philanthropic twist; for instance, the inheritance would need to be used for volunteer work in a Third World country.

It should be noted that an inheritance distributed outright to a descendant is vulnerable to the claims of the recipient’s creditor(s), possible marital break ups and so forth, while a Travel Trust can be protected from such claims by what lawyers call a “Spendthrift Clause.”

Our clients still want to provide for basic needs of their children and grandchildren, but beyond that, those with extra means are becoming increasingly philosophical in their estate planning. Thoughtfully prepared trusts can be used to influence the behavior of their beneficiaries in a positive way.

While in most cases, family members don’t know what has been set up in the will or trust until after their relative’s death, we urge our clients to discuss their intentions and wishes with their children during their lifetime, so that the children will have a better opportunity to really understand the thinking that lead to the creation of such trusts.

Your DiMonte & Lizak, LLC attorney would be happy to discuss your thoughts and wishes with regard to a planned inheritance for your children and grandchildren. While we can never disclose the confidences of one of our clients to another, we can share the knowledge which our experience in planning the estates of others has given us in counseling you.