Income Trusts

On matters related to my fathers death, I am reminded of my fathers foresight in dealing with his estate and his heirs. There was always an aspect of his personality that was not about self. And I suppose I have inherited that. My mother was the same way. My mother never spent frivolously and I suppose both, having come through the Great Depression, learned not to borrow money in excess. These days borrowing money is a way of life, with the abuse of credit cards and such. Credit has been badly abused in the past twenty years, and the general culture, the use of credit is encouraged. But in the last generation, the rule was, “if you can't pay for it, don't buy it.” Abuse of that rule has led to quite a bit of needless debt, from which only banks and lenders have profited from exorbitant interest. My wife tends to be a profligate spender in that regard, and despite high earnings, and gifts given to me in the way of money on the regular basis by my father, our family debt has risen and not declined. And so it's time to apply what I have learned from my parents, and what I have learned from the very rich - 'don't spend principle.' and - protect your assets. .

When my father died, he left a considerable amount of money to me, and to my sisters. And I have to decided to treat it, as though it was not my own, but still his, and to spend as much as possible, only from interest, or a percentage thereof.

And so, from that windfall born of sadness, I am setting up an income trust out of respect for what my father has earned, and was generous enough to pass along to his children.

My mother, who has saved most of her life, when every dime wasn't needed for raising kids at least, was also responsible in the same way as my father. With failing health and cognitive problems developing, secondary to advancing age, she is now in a nursing home. And, her savings is now in an annuity to pay for that care. In only a few years time, those savings will be gone. At that point - Medicare kicks in. And so, all of that money could be eaten up by nursing homes, despite a life time of work.and self discipline

Given the fact that I and my wife and I are in early middle age, the subject of conversation now is around how to avoid having my fathers hard earned money eaten up by catastrophic health crisis or liability. Or indeed - to avoid the risk to the family home of being subject to a similar fate. And the answer seems to be Irrevocable Income Trust. This type of trust reduces the risk to money that I didn't earn, and issues a stipend monthly based a percentage of interest, And – if only a percentage is used, the monthly stipend grows.

My kids have not reached an age of maturity, and so, if something should happen to my wife, or me, and one of us needed long term care - one or the other would have to finish raising and educating the kids, with possibly our house at risk from liens. And so, after seeing how nursing homes are eating through my mothers savings, I'd be a fool to leave assets in a vulnerable position. Income trusts also protects from liability. Too often we hear of people wasting windfalls, or mismanaging them, but because I don't see my fathers estate as really “my own” I don't intend to let that happen. When we are younger we don't think like this, but the morbid task of protecting my family has to be addressed – the way my father addressed it. I am proud of his example..

© Toylanders Press International (TPI) - Gary Stone 2009