By: Jim Dossey, MS, MBA, JD -
Princess Diana died on August 31, 1997 at the age of 36. She left behind her ex-husband, Prince Charles, and her two sons, Prince William and Prince Harry. At the time of her death, her estate was valued at approximately $28 Million.
Princess Diana documented her wishes in a Last Will and Testament dated June 1, 1993, later modified on February 1, 1996. Her Will distributed Diana's estate into two equal trusts for Prince William and Prince Harry. Princess Diana also left approximately $100,000 to her butler, Paul Burrell, and various personal effects to her 17 godchildren.
The trusts established for Prince William and Prince Harry, called testamentary trusts, were to last until the boys reached the age of 25. When Prince William and Prince Harry exceeded 25 years of age, the trusts terminated and the funds were distributed outright.
Although setting up the trusts this way may have been required in the UK, we would never advise this approach in the US. A better plan would have been for the trusts to last the entire lifetime of Prince William and Prince Harry.
A trust that lasts the beneficiary's lifetime, called a lifetime descendant's trust, not only provides controls over the distribution of the assets (so that the 25 year old doesn't blow the entire trust in Vegas), but it also provides asset protection for those assets. As long as the trust assets are contained within the trust, they are protected from creditors, the IRS, and bad marriages.
Additionally, lifetime descendant's trusts are also known as "generation skipping trusts" because they are not included in the beneficiary's estate. The beneficiary will avoid estate tax on the funds within the trust because they never take title to the assets.
Including lifetime descendant's trusts within a Will is an effective way to provide estate planning for future generations to come.
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