Protect Your Family From Wealth’s Dark Side With a Lifetime Asset Protection Trust
Bankrolling a cult is not exactly the first thing to come to mind when you imagine how your adult children will use their inheritance, but that’s exactly what 40-year-old Clare Bronfman, heiress to the multi-billion-dollar Seagram’s fortune, was led to do.
In May, Clare pled guilty to felony charges of harboring an illegal alien and fraudulent use of a deceased person’s identity as part of a plea deal with federal prosecutors. The charges stem from her role as an executive board member of Nxivm (pronounced NEX-ee-um), a group that prosecutors described as a “deeply manipulative pyramid scheme” that forced some of its members to endure slave-like conditions and even have sex with the group’s leader and founder, Keith Raniere.
Had she gone to trial for her involvement with Nxivm, Clare would have faced up to 25 years in prison, but given her plea, she’ll likely serve just over two years. Her sentencing is scheduled for July 25.
Following Clare’s plea, Raniere, 58, was found guilty in June on seven felony counts, including racketeering and sex trafficking. He faces up to life in prison when he’s sentenced on September 25. His conviction comes following a six-week trial that exposed the world to Nxivm’s sordid inner workings and put wealth’s dark side on full display.
Fortunately, there are proactive estate planning solutions designed to safeguard your adult children from such scenarios, and these planning protections aren’t just for the extraordinarily rich like Clare’s family, as inheriting even relatively modest amounts of wealth can lead to similar issues. Safeguarding your child’s inheritance from being depleted out by other, less devious events, such as a divorce, a catastrophic medical expense, or even a simple accident, is just as important as protecting them from a cult like Clare needed. You just never know what life has in store for your heirs and our planning protections can ensure their inheritance is protected from practically all potential threats—even those you could never possibly imagine.
From self-help to self-sabotage
Clare joined Nxivm, which was billed as a life-coaching program, in 2002 at age 23. She reportedly joined the group in hopes that its mentoring might help her fulfill her dream of making the U.S. Olympic equestrian team. In large part due to her substantial financial contributions, Clare quickly rose to the top ranks of the organization and became increasingly close with Raniere.
According to a recent Forbes article, Raniere took advantage of Clare’s estranged relationship with her elderly father, Edgar Bronfman Sr., and emotionally manipulated her into believing that her family’s money was “evil and that she had to purify it by spending it on ethical things like Nxivm.”
To help convince her, Raniere constantly reminded Clare that the Seagram’s fortune was made selling alcohol, and that her grandfather, Samuel Bronfman, earned millions by conveniently setting up his Canadian whiskey distillery directly on the U.S.-Canada border during Prohibition.
Under the spell of Raniere’s devious manipulation, Clare reportedly came to view her financial support of Nxivm as a way to make up for her family’s past. All total, Clare is said to have poured roughly $150 million into Nxivm. Much of the money was spent on funding Raniere’s failed investment schemes in real estate and commodities.
Another big chunk of Clare’s inheritance was spent suing Nxivm’s detractors. During her time with the group, Clare reportedly hired nearly 60 lawyers and spent approximately $50 million on lawsuits against journalists, ex-girlfriends of Raniere, and others who were critical of the group.
Big money can cause big problems
While we don’t know the exact age Clare came into her money or just how much of it she had access to, her total inheritance was valued at an estimated $200 million. The inheritance was reportedly held in a trust but given that she funneled roughly three-fourths of that sum into Nxivm in just more than 15 years, it’s likely her money was disbursed outright with little or no direction on how it could be used.
One unique planning vehicle designed to prevent the potential perils of outright distributions is a Lifetime Asset Protection Trust (LAPT). These trusts last for the lifetime of their respective beneficiaries, and provide them with a unique and priceless gift. With an LAPT, for instance, the beneficiary can use and invest the trust assets, yet at the same time, the trust offers airtight asset protection from unexpected life events which have the potential to wipe out their inheritance.
Exercise your discretion
When drafted properly, an LAPT can be used to educate your beneficiary on how to handle their inheritance by allowing the beneficiary to become a co-trustee with someone you’ve named at a specific age or stage of life and then the beneficiary can become the sole trustee later in life, once they have been properly educated and are ready to take over.
The LAPT is discretionary, which means that the trust would not only protect your heir from outside threats, like creditors and ex-spouses, but also from their own mistakes. The trustee you name holds the trust’s assets upon your death. This gives the person you choose the power to distribute its assets to the beneficiary at their discretion, rather than requiring him or her to release the assets in more structured ways, such as in staggered distributions at certain ages.
Your direction and guidance
Many of our clients choose to provide non-binding guidelines directing the trustee on how the client would choose to make distributions in up to 10 different scenarios, such as for the purchase of a home, a wedding, the start of a business, and/or travel. Some clients choose to provide guidelines around how they would make investment decisions, as well.This ensures that future trustees will be aware of your values when determining whether to make distributions as well as how to invest trust assets.
Don’t take any chances
You might think that something as depraved as what happened to Clare Bronfman would never happen to your children or grandchildren, but it can and does happen to even the most successful and upstanding among us. However, even if your heirs never experience a threat as evil as Nxivm and Raniere, their inheritance is still vulnerable to more common threats like divorce, poor spending, and sudden accident or illness.
Meet with us as your Personal Family Lawyer® to see if a Lifetime Asset Protection Trust is the right option for protecting your family wealth and loved ones from situations and which are simply impossible to foresee. Contact us today to get started with a Family Wealth Planning Session.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.
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