AFFLUENZA, DISCRETIONAY TRUSTS, HAPPINESS, AND YOUR DESCENDANTS
The world was shocked by the use of Affluenza as an explanation for antisocial behavior by a Dallas teenager. The world learned a new word for a new concept, a concept that questions the core of our belief system: the concept of too much money. Say the words “too much money” and people laugh.
Too much money?People laugh, because "there is no such thing as too much money". Money is the reward for our work, the bedrock of our security, and the vehicle for the fulfillment of our desires.Traditionally, trusts were used only to hold assets if the intended recipient of the assets was too young to manage assets; and once the heir reached maturity, assets were distributed. Then trusts were drafted to distribute assets at age 20, 30, and 40. Then ages 25, 35, and 45 became standard, as heirs were perceived to mature later in life. It was only for very wealthy families that discretionary trusts were designed to hold on to assets, distributing only part of the income, and very little of the principal, to beneficiaries.
Protecting the assets from the beneficiaryThe US is about to witness the largest wealth transfer ever seen, the assets of the Baby Boom generation. For this transfer, many of those who are well-to-do but not incredibly rich are creating what the Kennedys and the Rockefellers have been using for generations: trusts that do not automatically distribute assets to beneficiaries, but keep assets in a fully discretionary trust, to protect both the assets and beneficiaries. The assets are protected from the beneficiary because a creditor or a future ex-spouse only has access to assets over which a beneficiary has control or a right. A beneficiary may have a possibility of receiving a distribution without having a right to anything, if the trust is correctly drafted. The trust can be allowed to buy a house or a business, owned by the trust, for the benefit of the beneficiary. The trustee can also directly pay for the expenses of the beneficiary, without the beneficiary ever actually holding any assets.
Protecting the beneficiary from the assetsThe beneficiary is protected from the assets because the trustee can stop distributions if the beneficiary, in the opinion of the trustee, has substance addiction or gambling issues, or otherwise would not truly benefit from distributions; in which case, assets pay for rehab or counseling. But most important is avoiding Affluenza and promoting Happiness. Wealth creators worked hard and saved to create assets to protect their descendants from the vicissitudes of life, assets which might lead to their descendants' Happiness. However, these same assets can create self-entitled, aimless, unfulfilled, or self-destructive heirs (Affluenza). Recent studies have shown what wealthy families have always known: a person needs an occupation to have a sense of self-worth, and a sense of self-worth is capital for Happiness. Discretionary trusts can allow for distributions only if the trustee believes that the beneficiary is leading a purposeful life and contributing to society, leading to more Happiness and accomplishing the wealth creators' aim.