Philip Seymour Hoffman repeatedly rejected the advice of his attorney and accountant, both of whom advised him to create a trust. It is said he did so because he did not want his three children to be “trust funds kids.” For those of you who may be avoiding creating a trust because you do not want your children to be “trust fund babies,” we have written this article to dispel concerns over the misconceptions and stereotypes surrounding trusts.
The first thing worth addressing is taxes. Because of Hoffman’s aversion to proper estate planning, his $34 million estate faces a huge estate tax bill. A revocable living trust and other sophisticated planning could have provided more protection for Hoffman’s girlfriend and children and reduced his estate tax liability.
The second part of this that Hoffman just didn’t understand, is that by failing to control how his children receive distributions from his estate, he let them become trust fund babies…or worse. They don’t need to rely on a trust, they will get the cash outright! They don’t have to ask a Trustee if they can have money, they already have it.
Now you might be thinking you still do not need a trust, because you do not have a $34 million estate. This brings us to our second point. Trusts are not just for wealthy individuals. They are for anyone who wants their heirs to avoid the hassle, expense, aggravation, and stress of the probate process and for those who want to help their children avoid the mistakes of youth and immaturity. A revocable living trust can avoid probate court entirely, keeping your estate private and can control assets after you die.
In addition to avoidance of probate, and privacy, you can control when and how trust beneficiaries receive distributions. If one of your concerns is that you will create a trust for your children and they will blow through the money, a trust is actually the best estate planning instrument for you. You can set up a trust that only allows money to be spent for specific purposes. You can also create a living trust so that your children receive a modest allowance, but only if they perform certain approved tasks or achieve specific milestones. You are totally in control of your trust. You can rule from the grave for a long time!
It is not uncommon for our clients to set up distribution provisions which allow the Trustee to asset the beneficiary with education expenses, weddings, purchase of a home, and many other considerations. But the trustee can cease distributions if the beneficiary refuses to work, refuses to go to college, or acts irresponsibly, or is addicted to drugs or alcohol. You can’t always see what will happen to your children in the future. Using a trust allows you to provide your trustee with guidance and direction in how to distribute funds to your children. A common theme is to provide for principal distributions at particular ages so that a beneficiary gains experience over time.
If you have any questions about trusts, or any fears we can possibly quell, contact The Astill Law Office at 801-438-8698. We have been providing high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, give us a call.