Most people create an estate plan because they want to make sure that their hard earned assets, family heirlooms, or businesses stay within the family. As your children grow, so does your family. Often adult children get married, adding more people into the family. We all hope that our children marry trustworthy and responsible adults, however that is not always the case. A common question is how does one protect their child’s inheritance from their spouse who may be untrustworthy or file for divorce? There are ways to structure your will and trust in a way that protects your assets for future generations. Here are a few ways:
Create a Trust
Three parties are involved in a trust:
- The person creating the trust, often called settlor or grantor.
- The person or entity holding the trust property of the beneficiary, often called the trustee
- The person that benefits from the trust, called the beneficiaries
When creating a trust, it is a good idea to choose an independent trustee. This allows for fewer arguments. As this gives less control to the beneficiary to receive more assets than what the trust documents state.
There are terms that you may be unfamiliar with when learning about wills, trusts and other estate planning documents. This Estate Planning glossary may assist you in clarifying some of those terms.
In addition to creating a trust to protect your children’s inheritance, your children can use a prenuptial agreement for asset protection. It is important however, to have a trust in place. A prenuptial agreement details what assets were owned at the time of marriage and what assets were obtained after marriage. Although you hope that your child does not have to go through divorce, and statistics show that divorce rates are dropping, there is still a chance that your child may encounter divorce. Prenuptial agreements vary by states, so is to important to contact a legal professional prior to signing or drafting a prenuptial agreement. Talking with your children about a prenuptial agreement, may be an uncomfortable, however making sure your hard-earned assets go to your desired beneficiaries and ultimately looking after your child’s best interest often outweigh the discomfort.
Communicate Your Wishes
Outside of using estate planning legal tools, you may want to let you wishes be know to your family. You may want to have a family discussion about your estate planning intentions and the reasons for setting it up in this manner.
Use Clear Language
By using clear language in your estate plan you can avoid conclusion. It should be clear that the intent and purpose is of leave the inheritance to benefit descendants, and not the spouses. This further solidify your wishes. It is important for a legal professional to assist you in knowing how to properly document this in your estate planning documents.
Choose an Independent Trustee
If you have concerns about the spouse of one of your children taking control of your trust, you may want to consider having an independent party as the trustee. Banks often have corporate trustees. They are professionals and are held by high standards and regulations. They insure that everything is transparent. Additionally, there are professional fiduciaries, whose job is to administer trusts. These trustees are usually paid a percentage of the estate and are paid out of the estate. This may be a good option, if you anticipate there may be disagreements in how your estate will be administered.
Meet with an Estate Planning Professional
If you wish to make sure your descendants devise an estate plan that fulfills your wishes. Whether you don’t have an estate plan, or have one that is a few years old, sit down with an estate planning professional. This may help in making sure your goals are included in your estate planning documents. The Swenson Law Firm offers free estate planning consultations. We are located in Orangevale. Our clients are in Roseville, Citrus Heights, Folsom, Fair Oaks, Sacramento, El Dorado Hills and other locations.
We also offer Estate Planning Seminars. Check out our Events page to find out when our next seminar will be held.