The Kavesh, Minor & Otis
Personal Asset TrustSM
As estate planning attorneys, we face three great challenges in today’s environment. Some markets have become saturated, such that many people already have a Living Trust or other estate plan. There’s more competition from both attorneys and non-attorneys, to the point we feel more pressure to reduce our fees. And, third, the same old Living Trust approach, stressing the avoidance of probate and conservatorship, and possible reduction of estate taxes (for a married couple), just isn’t “sexy” anymore.
At our law firm, we’ve discovered one Living Trust feature that can blow away all of these obstacles - - the Personal Asset TrustSM. This one provision will allow you to take advantage of the saturated market by re-writing virtually every Living Trust you see. The uniqueness of this feature and it’s high perceived value will not only keep you from having to cut your fees, but will allow you to increase them. And, it squarely hits the “hot button” on the minds of most clients and prospective clients today - - asset protection.
What is this “Personal Asset TrustSM”? It’s basically a simple way to put a protective wrapper around what ordinarily would be an outright distribution from a Living Trust. In most Living Trusts, at some point in time, each beneficiary will receive his or her distribution out of the trust and right into his or her own name (with the exception of special situations like where you have a Special Needs Trust for someone obtaining government benefits or a Spendthrift Trust for someone with severe problems handling money). When a beneficiary receives a distribution outright, it’s needlessly exposed to spouses, divorce, lawsuits, creditors, bankruptcy, loss of government benefits and possible second estate tax when the beneficiary dies. With the Personal Asset TrustSM, the beneficiary receives his or her inheritance with much enhanced protection against all of these threats.
Although we have pioneered this Personal Asset TrustSM, it is not “new”. It’s an off-shoot of what has worked in asset protection law for well over 100 years. We researched the laws and document forms pertaining to asset protection trusts for over 10 years and spent hundreds of hours and tens of thousands of dollars in fees to some of the nation’s top asset protection attorneys in developing this Personal Asset TrustSM. Essentially, each beneficiary receives an asset protection trust to hold his or her inheritance, that springs out of the Living Trust document.
We set out to develop something unique. The garden variety, discretionary, generation-skipping trust offers far less asset protection than we desired. On the other hand, full-blown asset protection trusts are often too complicated and expensive to administer. So, we came up with an intermediate form of asset protection trust that is much less restrictive and easier for the beneficiary to use. Most people don’t want to rule from the grave and excessively burden their loved ones with paperwork, administration and expenses. We came up with an asset protection feature with more mass appeal that we could add to every Living Trust.
Our Personal Asset TrustSM allows for the maximum beneficiary control, while still gaining significant asset protection. The beneficiary may serve as initial sole Trustee, thereby controlling investment of his or her inheritance, as well as how he or she uses it. We built in features that allow the beneficiary to also determine who else can receive the assets both during the beneficiary’s lifetime as well as after death. If you think about it, these are virtually all the same rights as outright ownership, but the key distinction here is that the assets continue to be owned in a trust - - with special features designed to thwart attacks by third-party predators. The beneficiary effectively determines the level of his or her continuing direct involvement in the trust, depending on the level of asset protection he or she requires or desires; through Special Co-Trustee and Trust Protector provisions, the beneficiary can withdraw from some or all direct involvement with the trust, while still retaining a substantial level of indirect control, as well as use and benefit of trust assets.
Think about it…would any client or potential client say no to the following question? - - “Would you like to protect your loved ones from losing their inheritance to the claims of spouses, divorce, lawsuits, creditors bankruptcy and the IRS?” Typically, the discussion of this one provision alone will convince a client or prospect to do an amendment and restatement of an existing trust or to move forward in setting up a new estate plan - - without even having to get into the other features of your trust! We know, because we’ve been successfully selling this Personal Asset TrustSM since 2002 and it continues to be the biggest item that sets us apart and pushes prospective clients to move forward with us!
What's even better is that we are now making this available to other attorneys throughout the country to be able to implement in their own practices to enhance the quality of the estate plans they design for their clients! The Personal Asset TrustSM is built into our overall living trust document, but can also be done as a 27-page amendment to virtually any Living Trust! We have also developed a valuable Personal Asset TrustSM Beneficiary Manual to help ensure that the beneficiary will utilize it properly to his or her advantage, which will not only help attorneys and advisors understand the PAT better, but will also be a great roadmap for any client and client beneficiary in implementing this unique strategy!
It's a win-win for everyone involved and it's the best way to make sure that you, as an advisor, are providing the ultimate estate planning available to your clients!
Please note that the “Personal Asset TrustSM” does not alone guarantee “bulletproof” asset protection for your beneficiaries, but it does add much enhanced protection over the typical Living Trust’s provisions. Other, more advanced planning measures, such as Family Limited Partnerships, LLCs or Irrevocable Trusts may be warranted if you desire an even greater level of asset protection.