Don’t Think You Need a Power of Attorney: Think Again! [Part II]

July 19th, 2013

This is the continuation of our discussion of the benefits to be derived from a power of attorney in Texas. Even if you have not gotten around to having a complete estate plan developed, this simple document can solve many problems including incapacity planning, authorization for medical treatment for your children and more. If you have not yet read the first installment in this series, it may be helpful to do so before proceeding.

Medical Care for Personal Injury: If you are injured in a motor vehicle crash or other accident so that you are unconscious or in a coma, a durable power of attorney for medical decisions can empower the person of your choice to execute medical decision and authorize medical treatments and test on your behalf. While a family member could go to court and seek a guardianship, this process involves formal court proceedings and medical testimony so it can cause unnecessary delay and entail avoidable expense. If you have a durable power of attorney prepared and provided to the person that you wish to make medical decisions if you become unable to do so, this will make the process simple, efficient and inexpensive.

Management of Financial and Business Affairs: If you are suddenly incapacitated by a catastrophic medical emergency like a heart attack or stroke or suffer other injuries that render you incapable of managing your financial affairs, a Texas durable power of attorney can provide authorization to someone you select to manage your business or finances. Again, this can be done under court supervision when a family member or someone else close to you files for a guardianship, but this is comparatively costly and will result in delay so there may be no one with apparent authority to act to protect your financial interest in the interim. Further, the person who will watch out for your financial interest will be selected by a judge who may not appoint the person who you would choose if the decision were left up to you.

Once you have made the decision to have a durable power of attorney prepared, you must consider how to go about crafting this estate planning instrument. While many people use standard forms that can be obtained in office supply stores or self-help legal books, this can lead to disastrous results. There is no assurance that these documents comply with Texas law. Further, any pro-forma power of attorney form will be a crudely written catch-all document that may not meet your particular needs or concerns. The standardized form may be too broad and grant authority to perform tasks that you are not comfortable delegating or too narrow in failing to authorize crucial tasks.

When you retain experienced Texas Estate Planning Attorney Tom Reino, he discusses your specific objectives and so that he can customize a power of attorney to fit your unique situation. Further, you can be confident that the document will comply with Texas legal requirements. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Don’t Think You Need a Power of Attorney: Think Again! [Part I]

July 5th, 2013

While many Texas residents put off the decision to engage in developing a comprehensive estate plan, procrastination in preparing estate planning documents like a living trust, advance medical directive or last will and testament can created serious problems when a person becomes incapacitated. The failure to engage in estate planning will also cause problems for family member who have no legal document to facilitate protecting their loved one’s medical or financial interests in the face of an event that causes mental incapacity. Anyone who is not inclined to develop an estate plan should at least consider a durable power of attorney. This affordable estate planning instrument can solve a multitude of potential problems regardless of one’s age or individual circumstances. In this two-part blog post, we outline some of the advantages of having a durable power of attorney.

Execution of Documents: There are times that you may be unable to execute contracts or financial documents that are time sensitive. This unavailability may be the result of traveling or business commitments. Regardless of the reason that you are unavailable, a durable power of attorney over financial issues can authorize someone to act in your place to execute contracts or conduct financial transactions when you are unavailable to sign the appropriate paperwork. While you may have some trepidation about authorizing others to engage in contractual and financial matters in your place, an experienced Texas Estate Planning Lawyer can carefully tailor the document to the amount of discretion and range of authority that you want to grant. The power of attorney can even be limited in terms of the period that it is effective. Although a person acting as your agent under a power of attorney for financial matters owes you a fiduciary duty, you should obviously exercise care in selecting the person who you appoint as your “attorney in fact.”

Traveling Children: If your children will be spending the summer with their favorite aunt or traveling with friends, you should provide the person who will be caring for your child with a power of attorney so that they can consent to medical care. While no one wants to seriously contemplate the prospect that one’s child will be involved in a motor vehicle accident or a fall while hiking, the unpleasant reality of a family member or friend of the family trying to locate you so that you can authorize medical treatment of your child is even more disturbing. The use of a power of attorney to give a family member temporary guardianship will also allow the person to execute documents that require parental consent for participation by a minor.

Medical Care for Personal Injury: If you are injured in a motor vehicle crash or other accident so that you are unconscious or in a coma, a durable power of attorney for medical decisions can empower the person of your choice to execute medical decision and authorize medical treatments and test on your behalf. While a family member could go to court and seek a guardianship, this process involves formal court proceedings and medical testimony so it can cause unnecessary delay and entail avoidable expense. If you have a durable power of attorney prepared and provided to the person that you wish to make medical decisions if you become unable to do so, this will make the process simple, efficient and inexpensive.

Management of Financial and Business Affairs: If you are suddenly incapacitated by a catastrophic medical emergency like a heart attack or stroke or suffer other injuries that render you incapable of managing your financial affairs, a Texas durable power of attorney can provide authorization to someone you select to manage your business or finances. Again, this can be done under court supervision when a family member or someone else close to you files for a guardianship, but this is comparatively costly and will result in delay so there may be no one with apparent authority to act to protect your financial interest in the interim. Further, the person who will watch out for your financial interest will be selected by a judge who may not appoint the person who you would choose if the decision were left up to you.

Once you have made the decision to have a durable power of attorney prepared, you must consider how to go about crafting this estate planning instrument. While many people use standard forms that can be obtained in office supply stores or self-help legal books, this can lead to disastrous results. There is no assurance that these documents comply with Texas law. Further, any pro-forma power of attorney form will be a crudely written catch-all document that may not meet your particular needs or concerns. The standardized form may be too broad and grant authority to perform tasks that you are not comfortable delegating or too narrow in failing to authorize crucial tasks.

When you retain experienced Texas Estate Planning Attorney Tom Reino, he discusses your specific objectives and so that he can customize a power of attorney to fit your unique situation. Further, you can be confident that the document will comply with Texas legal requirements. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Important Texas Estate Planning Mistakes to Avoid [Part II]

June 21st, 2013

This is Part II of our two-part blog covering key estate planning mistakes that you should avoid to ensure that you obtain the maximum benefit and protection from your estate plan. While we have provided general information about errors committed by many people, the best way to obtain specific information about you unique circumstances is to speak with an experienced Texas estate planning attorney.

Stay away from amateurs.

There are some non-professionals that refer to their business as a “paralegal document preparation service” or “typing service.” People should be very cautious about relying on such services unless they confirm that the person providing the services is a licensed Texas estate planning attorney. Estate planning is one of the most complex areas of law so relying on a non-attorney to handle your estate planning needs is extremely risky. While a nurse practitioner may be excellent at what he or she does, you may not want this person to perform your triple bypass cardiac surgery. Given the high stakes for you and your family when setting up an estate plan, the decision to rely on someone who is not a licensed attorney with legal malpractice insurance is equally ill advised. Many people who attempt to use this type of “cost cutting” strategy make devastating mistakes like failing to fund their trust.

Provide a treasure map.

If you prepare a notebook that lists all of your assets and provides the critical financial information that a trustee or administrator of your estate will need, this can make the process of handling your estate upon death more efficient and less costly. There are many assets that you may not even remember that you have like a small life insurance policy from an employer you worked for many years ago. If you keep all of your title documents, retirement account statements, bank account records and similar documents with a list of assets and current values updated you will make administration of your estate less costly and more efficient for your family.

Make sure to get periodic estate planning “checkups.”

Many people prepare a will and durable power of attorney when they are in their thirties and presume that their estate planning is handled. However, there are many events in one’s life that will trigger the need to review your estate plan and update your documents. These may include the birth of children or grandchildren, your divorce or remarriage, divorce of a child, retirement from your business or occupation and many other major life changes. There are also frequent changes in the law that can impact your estate plan so it is important to periodically contact your Texas estate planning attorney to determine if you need to make any revisions to your estate planning instruments.

Review your insurance beneficiary designations.

Some of your assets will not pass via your living trust or a will in probate court. Certain assets like your home may pass according to the title if you own it in “joint tenancy,” which is true for many marital partners. Similarly, some assets like insurance policies will include a place to designate a beneficiary, and this designation will determine who receives the proceeds under the insurance policy. These designations should be reviewed periodically especially in certain situation, which include but are not limited to the death of a spouse, divorce and remarriage.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Important Texas Estate Planning Mistakes to Avoid [Part I]

June 7th, 2013

Estate planning can provide a wide range of benefits that include ensuring the uneventful transfer of assets and business interests to your successors, protecting your net worth from creditor claims, planning for future incapacity, avoiding probate and reducing liability for gift and/or estate taxes. Despite these benefits, many people assume that they can delay the process of setting up an estate plan until they reach a later stage in life. Those who already have an estate plan in place may delay updating their estate plan although significant changes in the law or life events have now made modifications appropriate. Experienced Texas estate planning attorney Tom Reino has provided some suggestions to help people avoid significant estate planning mistakes.

Assume it is already a rainy day.

Estate planning and procrastination go hand-in-hand for many people, but the problem with putting off the process of estate planning is that you need an estate plan in place before an event making it important occurs. Heart attacks, strokes and car accidents do not occur according to a schedule or when it is convenient, but the aftermath of sudden major events like these are precisely when you need a durable power of attorney for health care and financial matters or an advance medical directive. If you suddenly pass away without a trust and/or will in place, you cannot turn back the clock and designate how your want your assets to pass to your beneficiaries. Texas intestacy law will replace your preferences and wishes in terms of the succession of your estate.

Ultimately, estate planning is about advance planning so procrastination can lead to serious issues for both you and your love ones. One approach to estate planning involves using a simple estate plan that is less expensive to set up but that meets your needs when you are younger and modifying your estate plans so that it is more sophisticated as your estate and estate planning needs become more complex.

Avoid the estate plan in a box.

There are many so-called estate planning tools that offer “cheap and convenient” preparation of estate planning instruments either by using computer programs or standardized forms. This approach to estate planning can be worse than no estate plan at all. These inflexible standardized forms are not customized to your specific portfolio of assets, family structure and other unique factor relevant to your estate planning needs. Typically, these programs are not even adjusted to satisfy the statutory requirements under the law of individual states. It is important to remember that much of the law that impacts estate planning instruments and estate planning strategies is governed by the individual law of your state. Because those who rely on crudely drafted forms may have a false sense of security regarding documents that are invalid or ambiguous, they may fail to take steps that someone who knows they have no estate planning documents might, such as signing a hospital furnished power of attorney when undergoing surgery.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Key Facts You Should Know about Living Trusts in Texas [Part II]

May 20th, 2013

This is the second part of our two-part blog covering key facts that Texas residents should know when constructing an estate plan with a living trust. While living trusts provide a valuable tool that can accomplish a range of goals, every person’s position is somewhat different so there may be some situations where a living trust is less necessary. While we attempt to address many of the key issues that people should know about a living trust in this blog, we offer a free consultation which is the best way to learn about your specific situation.

Drafting a trust document is only part of the necessary steps involved in setting up a trust.

This point is very important because many people that rely on non-attorneys or computer programs to draft trust documents never actually transfer their assets into the trust. This process of actually setting up the trust by transferring your assets into the trust is the only way to make the trust effective. If this step is skipped, your trust document will be disregarded so your assets could pass by intestate succession to someone other than who you intended.

Trusts can protect the assets in your estate from your creditors or those of your beneficiaries.

Depending on how you set up a trust, you can place assets out of the reach of your creditors or those of your loved one’s creditors. If you set up an irrevocable trust, you have essentially already passed the assets to the beneficiaries of the trust protecting the assets from your creditors. If you set up a spendthrift trust, you can structure the trust to protect assets passed to your beneficiaries from their creditors.

A living trust provides a more effective way to appoint someone to manage your financial affairs in the event of incapacity.

If you are involved in a car accident or suffer a serious medical condition so that you are temporarily medically or physically incapacitated, a living trust offers an effective tool for allowing someone to access your accounts and manage your finances while you are incapacitated. While a durable power of attorney can accomplish the same objective, many financial institutions are more apprehensive about acknowledging the authority of a power of attorney than a living trust.

A living trust allows you to maintain control over your assets.

When a person sets up a living trust, the trust can be set up so that it is a revocable living trust, which means that it can be changed, modified or even eliminated based on the wishes of the person setting up the trust. The person who is creating the trust can also be the trustee, which means there is no loss of control over one’s assets. This flexibility can make a living trust a highly attractive estate planning tool.

The need for a guardianship can be avoided by setting up a living trust.

If you suffer a sudden catastrophic medical condition so that you are incapacitated, your family could be forced to go through the cost and complexity of the guardianship process so that someone is appointed to manage your financial affairs. This process can be costly and time consuming, but the existence of a living trust makes this unnecessary as the trustee or alternate trustee will exercise authority over the assets in the trust if you become incapacitated.

At our Arlington estate planning law firm, Mr. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Key Facts You Should Know about Living Trusts in Texas [Part I]

May 6th, 2013

Many people think estate planning is something that only seniors need to worry about because it involves the transfer of assets to one’s heirs when one dies. Although there is some truth to this understanding of the function of estate planning, this emphasis only covers a small portion of what estate plans can accomplish. In addition to succession planning, estate planning documents like a living trust can provide asset protection from creditors, incapacity planning in the event of a serious accident and tax relief. In this two-part blog post, our experienced Texas estate planning attorneys at the law office of Thomas D. Reino have provided an overview of some basic facts everyone should know about a living trust.

A living trust can protect you and your family from the administrative delay, hassle and expense of probate.

One of the most important functions of a living trust is to avoid the probate process which can be costly. The time lag associated with the probate process can also be difficult for your loved ones if you are the primary family breadwinner. In this situation, those you leave behind may be left in a difficult financial predicament if they must wait for administration of your estate for access to funds to cover living expenses. A living trust is already set up prior to a person’s death so there is no delay or hassle with probate proceedings.

While a living trust can be a very effective way of avoiding probate, it is not the only option. Assets like real estate, bank accounts and insurance policies may be held in “joint tenancy with right of survivorship” or have an identified beneficiary. If an asset is titled in this way, it will automatically pass to a loved one without the need for probate regardless of whether you have a living trust. However, there are advantages and disadvantages to both strategies so you should speak with an experienced Texas estate planning attorney about which approach is best suited for your individual situation. It is important to note that many assets cannot be titled this way so even if you rely on the joint tenancy approach for some assets this will not cover all of your estate.

A living trust may save you money and avoid taxes but not necessarily.

While the probate process can be costly, Texas has an expedited process that can make probate relatively inexpensive. While a trust can avoid the expenses associated with probate, the cost of setting up a trust may be comparable to this expedited probate process in Texas so it is important to obtain legal advice regarding which approach is more suited to your needs. The cost of setting up a trust also is increased because you will need a special type of will called a “pour over will” along with the trust. The function of this special kind of will is to ensure that assets not specifically placed in trust are still covered in your estate plan. The living trust may also help with estate tax avoidance depending on the size of your estate.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. While this blog post provides answers to some common estate planning questions, the best way to get more detailed information is to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Who Should I Appoint to Manage My Trust in Texas?

April 15th, 2013

Although many people recognize the value of a trust as part of their Texas estate plan, they may not have gotten around to creating a trust because they are uncertain what type of trust to employ and who to appoint as the trustee under a trust agreement. When determining who to appoint as your trustee, you must consider the objectives that are motivating you to create the trust in the first place. Some of the considerations that may impact the type of trust to suit your needs include:

• Whether you want to maintain ownership and control over the assets
• Long-term care planning issues
• Tax and probate consequences/costs
• Flexibility to make changes to the trust
• Importance of creditor protection for you and your beneficiaries

This is far from a comprehensive list of factors that must be weighed when deciding on the type of trust that will fit your needs and who to appoint as the trustee. It should be clear that an experienced Texas estate planning attorney can be of significant assistance in making these decisions by explaining the drawbacks and benefits of different types of trust arrangements. Below we have provided an overview of considerations about who to appoint as your trustee when creating a trust:

Appoint Yourself as Trustee: The decision to make yourself the trustee over your own trust is really a ruse that is not effective. The government recognizes that when you put your assets in a trust and maintain control over the assets as a trustee you really have done nothing more than play a shell game. This is typically a meaningless trust arrangement that will not really accomplish much. This type of trust arrangement can do significant damage if you do not have sound legal advice from a competent Texas estate planning lawyer. If you place your business in the trust, you hit the top tax bracket at $11,950 of income whereas you do not hit the top tax bracket of 39.6 percent until you make $400,000 when you file taxes as an individual.

Appointing a Family Member: While this can be a sensible option, you cannot appoint a family member who is a beneficiary under the trust. If the trustee also is a beneficiary, the trustee’s share is not protected from creditors by the trust arrangement. Because protection of assets against creditors is an important benefit of a trust, it makes little sense to set up a trust in this manner. There is another significant drawback to picking a family member to be your trustee. The available options may be limited if you have a falling out with the family member. If the family member mismanages the trust and make a poor investment, you will probably be hesitant to file a lawsuit against the trustee to hold him or her accountable? These are unfortunate options that may be faced if you use a family member as your trustee.

Financial Institution or Professional: This is a better option and includes those who are professional trustees. These individuals and institutions have insurance if they make a mistake and lose a portion of your assets. These types of trustees also have the knowledge and experience to make sound investments of trust assets. Because they are unrelated to you, there are none of the adverse family dynamics that impede holding the trustee accountable for negligence.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

What to Consider When Using a Texas Estate Plan to Nominate Guardians for Your Kids

April 5th, 2013

There are many important functions of a Texas estate plan which include succession and incapacity planning, asset protection and tax avoidance, but the most important function of an estate plan if you are a parent is providing for your children if something should happen to you and your spouse. An estate plan should both nominate a guardian for your children and establish financial arrangements for their care in the event of a car accident or other incapacitating event that leaves both you and your children’s other parent incapacitated.

Generally, parents may include a provision in their will to indicate who they wish to nominate as a guardian for their children. The court will typically honor this nomination unless there is some compelling reason not to do so, such as the person nominated is unwilling to accept the responsibility of being appointed guardian. While no one wishes to contemplate this extremely unlikely possibility of incapacitation of both parents, it is important that parents take steps to protect their kids if tragedy should strike. Further, the choice of who to appoint as a guardian for one’s children can be a difficult decision so it is important to carefully consider this decision in advance and prepare both the potential guardian and your kids.

Before electing someone as a guardian for your children in your estate planning documents, you should discuss your intentions with the prospective guardians to ensure that they are prepared to undertake the duties and responsibilities of raising your children according to your wishes. While you do not necessarily need to discuss your choice of guardian with your children, your kids will benefit from having someone appointed with whom they have a close relationship. The sudden change of going to live with someone besides one’s parents is difficult so the easier you can make the process the better it will be for your children. Here are some issues to consider when determining who to nominate as a guardian for your minor children:

• Philosophy and Approach to Parenting: If you pick those who have a similar parental philosophy when it comes to imposing rules and consequences as well as other parenting issues, it will make the transition easier for your children. While there will obviously be differences between the way people parent, the less radical the change the easier it will be to adapt.

• Avoiding Across the Board Changes: Sometimes there is no alternative other than to uproot kids if the best choice for a guardian does not live close. If it is a close decision between relatives that are able to move into your family home or that live close as opposed to parents that live in a distant state, however, your kids can benefit from maintaining their friends, school, activities and neighborhood.

• Provide for Financial Care: A Texas estate planning attorney can assist you in establishing the best financial arrangements for your kids if your nominated guardians need to care for your children. Sometimes it is advantageous to set up a trust that covers all of your children while in other situations there may be benefits to setting up a separate trust for each child. When you talk to your estate planning lawyer, he can advise you regarding the most efficient, safe and cost-effective alternative.

• Promote a Pre-Existing Relationship: If the best alternative to care for your children is a person who lives a good distance away, you should make efforts to ensure there is a pre-existing relationship. Whether it is arranging to visit this person or arranging for them to visit your home, the more contact your children can have with a potential guardian the more comfortable they will be if they need to live with this person.

At our Arlington estate planning law firm, Mr. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Modifying a Texas Estate Plan in the Wake of Marital Dissolution

March 20th, 2013

Because many marriages end in divorce, it is important to understand the benefits of a marital settlement agreement as well as the impact of divorce on the terms of a will. Many people continue to view prenuptial agreements as an unromantic partial commitment to the permanence of marriage. When either party to a marriage has children from a prior relationship, however, a prenuptial agreement is essential to ensure that children from the prior relationship, one’s current spouse and children from a pending marriage are provided for according to your intentions.

The process of providing for children from a prior relationship is easier when the parties to a marriage are on good terms than during the conflict that accompanies the divorce process. Most people would never consider entering into a business partnership without a partnership agreement which delineates that assets contributed by both parties, ownership shares and provisions for winding down the partnership, a marriage is a partnership that is more extensive than a business partnership. A prenuptial agreement is an important estate planning tool that ensures there is an agreement between marital partners about how these issues will be handled upon divorce.

Another important issue to consider if you are facing a pending divorce is the impact of that marital dissolution on your will. Under Texas Probate Code §69, the spouse from a marriage that ends in divorce is treated as though the former spouse pre-deceased the person whose will is being administered. In other words, all provisions for a former spouse in a will are invalidated under Texas law upon dissolution of the marriage. This means that if a person wishes to include provisions that benefit a former spouse in terms of testamentary gifts, the will must be revised to reflect these gifts following the divorce.

When both parties have prior marriages or children from other relationships, a carefully prepared estate plan can be essential to providing for those from multiple relationships. An estate plan should never be viewed as a finished product but an ongoing plan that must be revised with significant life changes including remarriage, birth of new children and divorce. Texas estate planning attorney Thomas D. Reino keeps in contact with estate planning clients so that he can periodically review their changing needs and inform them of changes in the law that impact their estate plan.

At our Arlington estate planning law firm, Mr. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Using a Spendthrift Trust to Provide Asset Protection for Beneficiaries in Texas

March 6th, 2013

One of the most important components of an effective estate plan is its asset protection features. When properly constructed, an estate plan can shield assets from your creditors as well as those of your beneficiaries. While many people postpone estate planning decisions, it is important to understand that the asset protection features of an estate plan must be implemented before the specter or a creditor claim or judgment is on the horizon to avoid claims of fraud.

A trust arrangement allows you as the Settlor to transfer assets into a trust that is managed by a Trustee for the benefit of the beneficiaries of the trust. While a trust can be either revocable or irrevocable and the same person can be both the Trustee and Beneficiary of the trust, there are limitations to such arrangements if the trust is going to provide asset protection.

The trust must be both irrevocable and you cannot be the beneficiary of the trust if you want the trust to provide protection from creditor claims. This type of trust is often called a “spendthrift trust.” This type of trust can be used to provide for the financial maintenance of another person while shielding the assets in the trust from the creditors of the beneficiary. This form of trust often is used to protect beneficiaries who may have difficulty managing their own financial affairs.

By way of example, the spendthrift trust might be set up with $500,000 in the trust with a limit of $25,000 per year in annual disbursements to protect a beneficiary who has a drug problem or gambling addiction. Any terms that are used to prevent a direct transfer of the trust assets to the beneficiary may be used to establish a spendthrift trust. While creditors can seek to have distributions made from the trust paid toward their claims, they cannot obtain a right to future payments from the trust nor the principal or assets within the trust.

This prevents the beneficiary from selling the trust assets to satisfy creditor claims. Although the creditor can still seek to enforce a judgment or other financial obligation against funds already disbursed, this spendthrift restriction prevents the entire principal in the trust from being pledged or the direct encumberance of future payments as they become due to the beneficiary. The protection of the principle increases the probability that the beneficiary will continue to have an ongoing stream of income for his or her care and support.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.