Leaving Assets to Kids, Not In-Laws, is a Popular Planning Technique
Have you ever wondered if you could make sure your kids inherit your assets but that their spouses do not get access to it? If you have thought about this, you are not alone. In the United States, statistics indicate nearly 50% of marriages end in divorce. When they do, division of assets is mandated by the court to accomplish what the court considers fair and “equitable”. If your child inherits from you outright and free of trust, then there is nothing to prevent them from:
(1) losing the inheritance in a divorce,
(2) losing the inheritance in a lawsuit or as the result of a creditor’s claim, and
(3) leaving their inheritance from you to their spouse who is your
While most people love their in-laws, almost everyone realizes half the time their married child will become divorced. If that happens, your in law could possibly get half of what you left your child ‘free of trust”. Fortunately, with a little bit of planning, you can make sure that will not happen.
Let’s say Frank and Jessica have a grown son whose name is Samuel. Samuel is married to Gretchen. Now, Frank and Jessica like Gretchen but they also think that Gretchen may seek a divorce in the future. If Frank and Jessica wish to ensure that Samuel’s inheritance will not be lost to Gretchen in a divorce, they can direct Samuel’s inheritance be left to him “in trust”. Samuel can be the legal owner (trustee) and the beneficial owner (the beneficiary). Samuel can be in charge of the money and have total use and access to it for all of his needs to maintain his accustomed manner of living. The trust can direct that upon Samuel’s passing, the assets go to Samuel’s children, not Gretchen. In effect, Frank and Jessica can make sure that Gretchen will not get any of their assets if their child gets divorced, and they can ensure that the money will stay in the family bloodline.
Is doing this this like creating a built in prenuptial agreement for your child’s inheritance? Yes. Do many people want to do this? Yes. Does this protect your assets? Yes. Does it make sure assets stay in your family? Yes. In a world filled with uncertainty, making sure your assets will stay in your family bloodline is a comfort to many. Fortunately, proper use of the law and a little bit of pre-planning can make sure your assets will stay in your blood family.
~~ Contributed by: Mark F. Winn, Master of Laws (LL.M.) in Estate Planning, a local asset protection, estate planning and elder law attorney.