July 11, 2011   Trusts

Promotion of Family Values Through a Trust

By Patrick Phancao, J.D.
According to a study done through The Institute For Preparing Heirs, 70% of people who receive an inheritance will spend it in its entirety, and 80% will do so within 2 years. These are pretty frightening numbers, especially considering that the size of the inheritance plays a very small factor in the speed at which that amount will be expended. Yet, most revocable living trusts focus mainly on the asset portion of a family estate plan. The disbursement of family assets are usually set at certain age brackets without much thought behind it. Those numbers are usually arbitrary; simple milestones such as a graduation, job acquisition, and so forth. Though there is nothing wrong with that, I would like to challenge the status quo and dig deeper to see the purpose behind these decisions.

Let me tell you a little story about an uncle of mine that I never got to know very well. Because my family trav­elled so much, I never got to spend a lot of time with him. But he was one of those relatives that would always brag about how he carried me when I was born, how I would always run to him as a toddler, and so forth. What we lacked in time we made up in quality. Though he wasn’t a man of large means, when he passed away, he was kind enough to leave me a small sum for my college education, and a small picture album of the two of us when I was a toddler. As you would imagine, I spent that money in less than six months, but I have that album with me to this day. The simple notes he took of our time together continues to strike a chord with me each time I read them. Some things do last a life time.
 
The passing of assets through a Trust is an unbelievably effective tool, and one that should be used to its fullest extent. However, the philosophy behind that distribution can be shared and elaborated upon to a much greater ex­tent. In a sense, this is where one would ensure to retain, or enhance family values.
 
For example, some figure that if they are not around, the inheritance can be distributed to the beneficiary at age 18 with some spendthrift provisions in the event of a law­suit. Then, a larger amount can be given upon receipt of a college degree, which is an effective tool for promoting education.
 
These methods are fine. However, they are lacking in guidance and purpose for the motivation behind these milestones. Let’s use concrete examples: Assume a client is an avid believer in traveling and learning about different cultures. Instead of simply allocating a dollar amount for such, why not have the client elaborate and write a person­al letter telling the beneficiaries about the adventures and life lessons he / she got out of that. Such a simple ges­ture wouldn’t simply motivate the intended beneficiaries, but would also provide a tangible, emotional connection between family members. Rather than simply promoting education, why not record the parents speaking to their children as to the exact reason why they want to promote schooling. Most would simply assume “a better job op­portunity.” However, coming from an immigrant family, my Mother told me on numerous occasions that money had nothing to do with it. Rather, the privilege of going to school and being in an environment where knowledge was encouraged was something she had envied throughout her life. She never had that opportunity, and my being able to experience it enabled her to live her dreams through me. Believe me, these pep talks did more to motivate and inspire me than any job opportunity or inheritance would have been able to achieve.

So it is with marriage and staying the course. If the cli­ent believes strongly in family relationships, he / she can encourage the beneficiary to follow that path not simply with a monetary form of financial incentive, but a letter explaining the tradition.

A Revocable Living Trust enables aspirations and tradi­tions to be passed on to younger generations, but too often they are merely brushed aside as a tangential issue. The money will come and go, yet family values can last a life­time. Make sure to spend enough time elaborating these important concepts to your clients. True lasting Attorney- Client relationships only last to the extent they trust you with their family members.
 
About the Author 
Patrick Phancao is an Estate Planning Attorney licensed in CA, FL, and the U.S. Patent & Trademark Office. He is the co-founder of Asset Protection & Elder Law Center in Irvine, CA, and is a member of WealthCounsel and NAELA. His entire focus is ensuring that his clients and their families are protected from unnecessary legal and tax issues regarding their assets. Mr. Phancao takes great pride in putting his client’s “voice” in their estate plan, creating a lifetime legacy for future generations that reach far beyond mere wealth. Should you have any questions regarding this article, please visit www.apelcenter.com, and sim­ply request the absolutely free report on your particular legal concern. Should your need be pressing, simply call 714-966- 2646. 
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