Limited Term Trust

A Limited Term Trust is designed to last for a specified term of years with the trust assets returned to the settlor at the end of that period. For instance, Dr. X is forty-five years old, married with two young children, and earning a comfortable living. He has $2 million in savings and doesn’t currently need the income generated from these investments.

His primary goal is to protect his savings from any type of lawsuit or claim, and he wants to make sure the funds are available for his planned retirement in twenty years.

We set up a trust with the $2 million dollars which provided that income and principal be used to pay for support and education of the children until they complete their education. At that time, the remaining balance of the funds is returned. The benefits of this arrangement are that the amount in the trust is well-protected from potential claims during the period that the children require support. Ten or fifteen years later, when they are on their own—and the parents need the funds for their retirement—the money is available. At that point, since Dr. X will no longer be practicing medicine, asset protection concerns will be minimized.

A similar result could be accomplished if Dr. X put his savings in a Family Limited Partnership. He would retain a 1 or 2 percent interest as general partner. The remaining 98 percent of the limited partnership interests could be placed in the trust for the children.