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Elder Law Today Newsletter | Vol. 17 | March, 2007

 

"My Son In Law is a Big Fat Dummy." Remedy: The Personal Asset Trust

In an interview with a new client some time ago, who was a widow, she told me that she had a son and a daughter, both grown, and both in their 30’s.

When I asked my client if, when she died, she would like distributions to be made equally to her two children, she said yes, but said that, “My son-in-law is a big fat dummy.” When I asked her what she meant, she explained that she was sure that after she died, her son-in-law would divorce her daughter, and that with a good divorce lawyer, he would take half of her daughter’s inheritance in a divorce proceeding. She also said that she was sure her daughter would later marry another “Big Fat Dummy.”

I then asked my client how her son was doing, and she said that he was a very talented artist, but that he had several money judgments against him. She said that he makes good money when he sells his art, but that sales were far and few between. She also said that her son always spent more than he made, and that he was always running up debt.

My client went on to say, jokingly, that she wished there was some way for her to control distributions to her children after she was gone, and that by doing so, be able to continue to protect her children. I quoted my own mother who used to say, “Once you have a child, you will never draw a free breath again as long as you live.”

I suggested to my client that there was a way to help protect the inheritance for her two children, and still provide that they receive what they wanted from their inheritance during their lives. I explained that we could prepare a revocable living trust for her, and that when she passed away, her assets would be divided into two other trusts, one for each child, called “Personal Asset Trusts (PATs).” The PATs would be part of the revocable living trust, but would not be funded or operative until she passed away. The PATs would continue on for the lives of her children.

I explained that each of her children would be the trustee of their own PAT. Each child would determine how their assets would be invested, and how they would be used and spent. Each would also determine who, including themselves, would receive any of the assets during their lifetime and at their death, and how much. Each child would also name the beneficiaries of their own PAT.

I also explained, however, that each child would not technically own the assets in their PAT. And, that there are legal walls built around the PATs to greatly enhance protection of each child’s inheritance against divorce, creditors, lawsuits, etc. Also, if there are problems, each child could bring in a co-trustee to help in the protection against creditors.

I have taken some poetic license with regard to the language and circumstances of this scenario for illustrative purposes and to protect my clients, but similar examples are commonplace. Please feel free to contact us for additional information regarding the PAT.

Other Probate & Trust Newsletters

Avoiding Probate in California

A Primer on Probate

Funding Your Revocable Living Trust

Can I Have a Trust for My Pet? Yes!

"My Son In Law is a Big Fat Dummy." Remedy: The Personal Asset Trus

Problems With Typical Revocable Living Trusts and Financial Durable powers of Attorney - And the New 70

Long Term Care Provisions for the Revocable Living Trust and Financial Durable Powers of Attorney for Couples Facing an Diagnosis of Early Dementia

The Revocable Living Trust - Preparing for Incapacity


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