A Family Bank Can Serve
Many Planning Purposes
Most baby boomers are looking to preserve the wealth theyve built up over the course of their lives, but they also are concerned with the distribution of that wealth, according to Herbert K. Daroff of Baystate Financial Services, Boston, Mass.
“The overwhelming majority of my clients have as their primary estate planning objective, How do I protect my assets from my daughters next husband?” Daroff explains.
The second most common objective he hears is they want to make sure to leave their children enough assets so that they can pursue any kind of life they would like but not so much as to spoil them.
A strategy that Daroff uses to address both these concerns is what he refers to as a “Family Bank.”
The family bank, he explains, is a combination of a Limited Liability Corporation and a dynasty trust that holds family assets. The family bank approach gives his clients much more flexibility than a typical trust arrangement. Through the bank, individuals are motivated by the use of taking loans.
For example, in a typical trust arrangement, distributions can be made to pay for a childs education. But many clients may object to “paying for their childs third freshman year of college,” Daroff says.