There are many websites that sell estate planning forms including wills and living trusts. Some websites help you create forms by filling in blanks. You can save a lot of legal fees by doing your estate planning forms yourself with the help of online services. Sometimes, the forms you create for your own family do a good job and save money. But sometimes, you create a legal disaster for your family. Here is an example of how one of my clients created a mess her parents and herself.
The client anticipated a civil judgment which eventually was entered against her. Prior to the judgment the client assisted her 80+ year old father create an online will. The father’s estate was more than enough to pay off the judgment. The client figured out that her inheritance must remain in a testamentary trust for her benefit with a spendthrift clause to protect the creditor from getting the entire inheritance.
Where the client erred was in drafting the terms of the testamentary spendthrift trust. The proper way to draft a trust for creditor protection is to give the trustee full discretion over payment to the beneficiary of interest and principal. Not fully understanding the drafting choices, this client created a trust for her benefit that required distributions of all income and also provided for required principal distributions at set time intervals after her father’s death.
Her father died. The estate is in probate. After the father’s creditors are paid and the probate is closed the personal representative will transfer the inheritance into the trust under terms of the will. Thereafter, the client’s creditor will be in a position to garnish the required income and principal distributions until the judgment is paid in full.
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