Fund Your Trust: The Best Option for Life Insurance Proceeds

 

 

Transcript:

Hi, my name is Jordan Flake. I’m an attorney with Clear Counsel Law Group and I specialize in estate planning.

Our office provides a free consultation.

What that means is you can sit down with me, bring your old documents if you have any, bring your current documents, any questions you might have, just give us a call and put a time on my calendar with our receptionist and we’ll sit down and discuss whatever it is that is on your mind with respect to your estate planning questions.

Please take us up on the free consultation.

 

Make Sure You Fund Your Trust

One question that I often deal with is this. People will go an attorney, they’ll feel like they’re being super responsible and they’ll go to an attorney and they’ll set up a trust.

They’ll have all the provisions about where the assets go, who’s in charge of the assets, all the contingencies planned out and then when they pass away, tragically, we discover that the trust was never funded.

Now what do I mean by funded? What I mean is that a trust kind of operates like a box. What you’ll want to do is make sure that your different assets either are placed in the box during your lifetime or that they are set to fund into the box upon your passing.

Something that might be within the box during your lifetime would be a house or a parcel of real property.

Something that you might want to have go pay on death or beneficiary to a trust, the box, would be a financial account, bank, checking, savings and perhaps also a life insurance policy.

This whole process is called funding the trust.

Even if you think you have your estate plan all done, I would love to get an opportunity to review it so that I can determine whether or not it’s properly funded with all of the assets that you have.

Please give us a call and we’ll sit down and I don’t charge to do that. We can have a conversation about it.

 

life insurance, fund the trust, estate planning, las vegas, nevada

 

A ‘Fund Your Trust’ Example with Life Insurance Proceeds

Let me talk about why that’s a good idea. I often get a question about life insurance proceeds for example.

You might be sitting here thinking, “Jordan, if I have my son … My wife passed away a few years ago. I have my son Joey and he’s already listed on the life insurance policy. Why should I have them go into a trust?”

That’s actually a really good question and the reason is because oftentimes the trust will provide more protection. If you are just listing Joey as the beneficiary, that’s what I call the look-out-down-below philosophy of estate planning.

You’re essentially saying, “Hey, when I die, Joey, look out down below,” because that life insurance company is just going to send that money immediately down his direction, regardless of his situation in life.

Instead of that, if you have it go into a trust, you can actually have provisions that can hold back that money and protect it for Joey’s benefit in this example. Let me kind of flesh that out a little bit.

 

Why a Trust is a Good Option for Life Insurance Proceeds

In the first scenario, let’s say when I pass away and my son Joey gets my $200,000 life insurance policy, let’s say that tragically, Joey has caused an accident and there’s an injured party who’s coming after him for some money. Let’s say that Joey has stopped paying his taxes four years previously.

Also, he’s been going through a divorce situation and as a result of all this stress, Joey has started abusing substances, possibly alcohol. We see that Joey might not be in the best condition or the best state to receive $200,000 just landing in his lap, because of all these other situations that are going on in his life.

Now there aren’t laws that demand for example that all that money be turned over to his soon to be ex-wife. There’s some protections in place for that, but we can all agree that if he’s going through these things, it’s not a good time to say, “Hey, look out down below. Here comes $200,000 landing in your lap.”

 

How to Use a Spendthrift Provision in a Trust

What you’ll want to do instead is list the trust as the beneficiary of that life insurance policy and then have the trust say, “I desire that the proceeds of the life insurance policy go to my son Joey.” Because what the trust will also allow in Nevada is a very robust spendthrift provision.

A spendthrift provision comes from this idea that you don’t want your property to go towards somebody who’s going to be wasteful.

What the provision says is that if Joey is involved in any type of event in his life or any circumstances that would deprive him of his ability to use these assets, this distribution, this gift for his own purposes, for his own health care, enjoyment , maintenance, whatever he wants to use it for.

If he’s in any situation that would deprive him of that opportunity, then the trust actually requires that that money be held back until he’s then in a good situation to move forward.

He’s resolved the tax disputes, he’s gotten rid of the lawsuit, the divorce is all settled and tied up, and he’s got his life back together and he can stop abusing the substances and say, “Okay, I’m ready to receive this money.”

 

There’s a Reason I Say I am in the ‘Peace of Mind’ Business

I always say that I’m in the peace of mind business. What I really like to see is Day 1, when a client comes into my office, they say, “Jordan, we don’t know what to do. We love our children.

They’re not all super responsible. We’ve spent our whole lives accumulating this property and we want to gift it to them, but we want to make sure that it goes in a way that they’re actually going to receive and enjoy it.”

What we do often is we’ll set up a trust and we’ll have a nice, robust spendthrift provision that says, “Hey look, if any of your beneficiaries are in some kind of life circumstances that are preventing them from using this money, the trustee can actually hold that back and wait until the skies are sunny and clear.”

Once we’ve signed that document, that’s when I get the big payoff from being an attorney because I get to see their peace of mind, they let out this sigh, and they say, “It just feels so good to know that that’s taken care of.”

That’s really what I want to be able to help you with is achieving this peace of mind with respect to your estate planning.

Please give us a call (702)476-5900. Set up a consultation.

I don’t charge at all just to meet with you, go over your questions and issues, give you an education about your different options and then you essentially decide and you tell me what you want to do.

Again, that’s a no-charge consultation, (702)476-5900.

Thank you.

 

 

Clear Counsel Law group

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