Florida Elder Law & Estate Planning Blog
An Inheritance Trust Can Keep Your Assets In Your Family
July 30, 2020
Do you have married children? Are you thinking about your estate planning? If the answer to both is yes, one of your goals is probably making sure your hard-earned assets end up with your own grandchildren should your child get divorced or pass away. You may be very fond of your daughter-in-law or son-in-law. Nonetheless, your inheritance ending up with your in-law – or maybe even with your in-law’s children from another marriage or your in-law’s new spouse – is the stuff sleepless nights are made of. Surely that is not why you scrimped and saved all these years.!
Even if your child remains married, you may have reservations about his/her spouse. Is the spouse responsible with money? Is the marriage a stable one? Might the spouse pressure your child into spending money foolishly? Would your child co-mingle your inheritance with marital funds, giving the spouse control over that money?
A candid conversation with your child and in-law may not go over well
While we generally advocate talking candidly with your family about estate planning matters, these concerns are probably best left unshared in this situation. After all, you want to stay on good terms with your child and your in-law – for their sake, for yours, and for your grandchildren’s. Regardless of whether you love or loathe your in-law, you don’t want to inject any tension into the marriage. Telling them, “We plan to leave an inheritance to you, our own child, but we really don’t trust your spouse and don’t want him/her getting it” is not exactly a recipe for family harmony.
Some people are so plagued over how to handle these concerns that they procrastinate endlessly. Then they end up with no estate plan at all, or with a plain vanilla last will and testament. In both cases, the child will ultimately get your bequest, outright – without any planning to prevent the nightmare scenarios you’ve worried about.
An Inheritance Trust could be the answer to protecting your child and grandchildren
Is there a method to keep your hard-earned assets in your family, your bloodline? To make sure that your child and grandchildren benefit from your bequest, not your in-law or your in-law’s new spouse or children who are not your own grandchildren? Traditional estate planning techniques cannot accomplish this. Fortunately, there is a solution: An Inheritance Trust.
With an Inheritance Trust, you can protect your child’s inheritance from his/her spouse in the event of divorce or your child’s death, while avoiding the radioactive Don’t share this with your spouse! conversation. You can protect your grandchildren and make sure your hard-earned assets don’t end up with in-laws.
Plus, there are two added benefits to the Inheritance trust. First, you may also be able to protect your child’s inheritance in the event he ends up in financial trouble. Second, it can also avoid probate.
How the Karp Law Firm Inheritance Trust keeps assets in your family
- Our firm will create an Inheritance Trust for your child. If you have more than one child, each child will have his/her own Inheritance Trust.
- Your child will be the primary beneficiary. He/she will also be the trustee of the trust upon your passing.
- The Inheritance Trust is the beneficiary of your revocable trust and/or any insurance policies you have. Upon your death if you are single, or upon the death of both you and your spouse if you are married, these assets will flow into your child’s Inheritance Trust.
- Under the provisions of the Inheritance Trust, your child, as the trustee, will have full access to the principal and income during your his/her lifetime. In accordance with trust provisions, your child is free to use the funds for his/her own benefit and for his own children’s benefit. That means your child can never say that parents were “ruling from the grave.”
- It also means that your child can avoid telling the spouse, I won’t share this money with you. Instead, your child can explain that you left money to him/her in trust, to be used for specific purposes, and as trustee, has a legal obligation to honor the terms of the trust. That’s a far more palatable explanation.
Protecting your grandchildren in the event of your child’s death
A key feature of the Inheritance Trust is that it allows you to name the beneficiary(ies) who will receive any funds remaining in the Inheritance Trust when your child passes on. Most people name their grandchildren as beneficiaries. In the event your grandchildren are still young when your child passes, you should also name a trustee to hold and manage their money. Many people name another one of their children as trustee should this occur, directing them to use the money for the grandchildren’s health, education, support and maintenance. You can also set a specific age at which the funds will be released to the grandchildren.
Your child, the original Inheritance Trust trustee, has the power to alter beneficiaries, but ONLY if a beneficiary is another of his children, or another one of your children or grandchildren.
If your child dies without any children of his own, the Inheritance Trust can direct that any unused funds will be divided among your blood relatives, generally the deceased child’s surviving siblings and your other grandchildren.
Summary: Benefits of an Inheritance Trust
- The money belongs to your child. Your child has complete access to the trust principal and income.
- Divorce protection. The funds you pass to your child through the Inheritance Trust are not a joint asset with his/her spouse. Therefore, the money is protected from the spouse if your child divorces.
- Easier on your child’s marriage. Leaving money in trust specifically for your child makes it easier for your child to keep it separate from his/her marital funds. Most spouses will find it more palatable to hear, This money was left in trust by my late parents specifically for me and for their grandchildren, rather than, I have this money, but I want to keep it separate.
- The money stays with your own blood relatives. When your child passes away, any funds remaining in the trust will be distributed to your child’s children (your grandchildren), or to your other children.
To see a graphic illustration of the Inheritance Trust click here.
Our lawyers would be pleased to talk with you about how an Inheritance Trust can serve your estate planning goals. Call us at 561-625-1100 or email us to schedule your consultation.