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Income For Life Trust

This edition of the Koldin Report E-Newsletter reviews the use of an “Income for Life Trust” to provide family members with the security of a steady income. All prior newsletters are saved on our website. You can read them by clicking here.

For many reasons, you may want to provide for someone during his/her life, such as providing him/her with a guaranteed income for life. Common situations are to support spouses of second marriages and children who have special circumstances.

Example 1: Mary has a daughter, Jane, who does not handle money well and would spend any inheritance she received. Jane often is unable to save to pay for expenses and needs to ask relatives for help. Instead of leaving Jane her share outright, Mary would like to provide Jane with a guaranteed monthly income to meet her monthly expenses.

Example 2: Tom and Jill are married. It is a second marriage and they each have 2 children of their own. On his death, he wants Jill to have a steady income to support some of her expenses, but ultimately he wants his life savings to be inherited by his own children. He wants to set aside $200,000 to generate income for Jill. He wants the rest of his savings to be distributed to his children.

Income for Life Trust

A solution to Mary providing for her daughter and Tom providing for his wife, is to designate an “Income for Life” Trust as part of the beneficiary clause of their Will or Living Trust.

They could leave a set amount of funds into this Trust. The Trustee or Trustees that they designate would be directed under the terms of the Trust to distribute all of the income to the beneficiary. If desired, the Trust could also provide that the Trustee has discretion to distribute principal to meet certain expenses.

When you set up an “Income for Life” Trust, you designate who you want to inherit the funds after the life beneficiary dies.

In Example 1, Mary’s Will or Living Trust beneficiary clause could leave her estate equally to her 3 children, but direct that Jane’s share be held in a Trust with income for life and on Jane’s death, the remaining balance shall be distributed equally to Jane’s children.

In Example 2, Tom’s Will or Living Trust beneficiary clause could leave $200,000 in a Trust for his wife, Mary, with income for life. The balance of his estate would be distributed equally to his children.

A “Life Use Trust” accomplishes the goals of providing for your spouse or other family members and also preserving the inheritance of your children. One problem with establishing a “Life Use Trust” as part of your Will is that Wills need to be probated and this requires time and legal fees. Another option to consider is to establish your own Revocable or Irrevocable Living Trust. The beneficiary clause of your Living Trust can leave your assets into a “Life Use Trust” for your spouse or other family members on your death.

For a full discussion of Revocable Trusts and Irrevocable Trusts, please click here.

Your family situation can help you decide if a “Life Use Trust” as part of your beneficiary provisions would be advisable for you. At the Koldin Law Center, P.C. with offices in Syracuse , New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. At the free initial consultation, we will review with you the advantages and disadvantages of Revocable Trusts and Irrevocable Trusts, along with other estate planning considerations including a Will, Power of Attorney, and Health Care Proxy.

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