Using ''Moral Suasion'' in Estate Planning

Attorneys are trained to create legally binding agreements. This approach may end up being heavy-handed when it comes to estate planning, often resulting in social problems for the family. For example, lawyers will set up “inheritance trusts” to protect the inheritance from children’s divorces, lawsuits and creditors and to keep the assets in the bloodline. To make these agreements legally binding, they will put two of the children in charge of the trust, requiring them to act together. This way the inheriting child cannot, for example, take assets out and give some to their spouse. Yes, it’s legally binding but can be, and often is, a social disaster.

Let’s say son wants to buy a condo in Florida. His sister thinks it’s too expensive and doesn’t agree. It’s not hard to see what their relationship will be after that exchange! Similarly, when the parents have passed, often the children will say to each other “I don’t want this, do you?” and will agree to “I’ll give you yours if you give me mine” and then all of the trust protections are gone.

We believe there’s a better way, based on the concept of “moral suasion”. Moral suasion is an agreement based on argument and persuasion rather than coercion or legislation (Oxford). Our proprietary “Inheritance Protection Trust” has the child acting as the sole trustee. The trust provides the protection from divorces, lawsuits and creditors, allows your son or daughter to use the funds for themselves and their children in equal or unequal amounts, and leaves it to the grandchildren at death. Yes, son or daughter can take all the money and give it to their spouse, but why would they? If this is any concern, such as their having a spouse that dominates them, then certainly you may name a co-trustee. In our experience, this occurs in less than 10% of the cases.

The advantages of using moral suasion are that it preserves the relationship between siblings and your son or daughter has no incentive to undo the trust, since they alone are in charge and may do whatever they wish with the assets.

With the high rate of divorce, along with an ever more litigious society, the Inheritance Protection Trust has become mainstream in estate planning today.

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