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Protecting assets from mishandling


There are several ways for a person to make sure that their assets will go where they want and be used the way they want. This article lists the main ways to protect assets from being mishandled or misdirected. 

Create a will

To make sure that assets will go where a person wants them to go, they should create clear, written documents stating their wishes. These documents should include a will.

In a will, a person names the people and organizations they want to receive their assets after they die.  A will is the key document in any estate plan, and one that should be made even if a person has set up trusts. The reason is that many smaller or more personal assets, such as keepsakes, either cannot go into trusts or can easily be forgotten when setting up the trust.

Create a letter of last instruction

Like a will, a letter of last instruction contains a list of assets and beneficiaries (in addition to other information). Unlike a will, it is not legally binding. This means that it just needs to be dated and signed, not witnessed and notarized, which makes it an easier document for a person to create and update. 

Writing the letter is a good way for a person to organize their thoughts for a will and to give loved ones further guidance about where assets should go.

Set up a trust 

A trust is a legal entity that can own assets, such as money and property. Once a person has shifted ownership of assets from themselves to the trust, the assets often become easier to manage and distribute. This is because the person setting up the trust, known as the trustor, can set conditions for when the assets are given out and how they can be used. 

For example, a trustor can say that their daughter will receive one-third of her assets when she is 25, one-third when she is 30, and the remaining one-third when she is 35. There are almost no limits on the conditions that a trustor can put on their assets. This makes it easier for them to make sure their assets are being used in the way they want.

Some of the most common trusts are a revocable living trust, a gift trust, and a charitable trust.

Revocable living trust

This trust allows the trustor to continue controlling and enjoying their own money and property while they are alive. But they may also name the people who will receive the assets after their death.

Gift trust

A gift trust is a way for the trustor to give their heirs gifts of money, property, or other assets in stages and while the trustor is alive. These are often created by couples to pass along their wealth to their children or grandchildren in a controlled way.

Charitable trust

A charitable trust sets up a fund for worthy causes. For example, these causes could include education, health, and poverty relief. 

Tell loved ones the documents exist

A person creating a will, a letter of last instruction, or a trust should take several steps to make it even more likely that their wishes will be understood and followed. They should:

  • Tell their loved ones that these documents exist and where they are being kept. 
  • Tell the beneficiaries of trusts about the existence and conditions of the trust.
  • Make sure that the will and letter of last instruction do not contradict each other. 
  • Make sure that the named beneficiaries in the will and letter of last instruction are consistent with those in life insurance policies, trusts, Transfer on Death accounts, and other assets where beneficiaries are named.
  • Review documents each year, or whenever there is a major life change such as marriage, divorce, new children, or the diagnosis of a major illness. 
  • Review any revocable (changeable) trusts periodically to see if any amendments are desired. This might include adding a beneficiary (for example, a new grandchild) or changing some of the conditions for a given beneficiary.

Related information

Assets and liabilities

Asset protection trust

Charitable trust

Creating legal documents

Engaging an attorney     

Estate and inheritance taxes

Financial plans versus estate plans

Gift trust

Life insurance trust

Overview of estate plans

Overview of trusts

Revocable living trust

Special needs trust

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