Parents have one goal when thinking of leaving an inheritance: to protect their children. This can include protecting their children from their son-in-law or daughter-in-law. Many want to make sure that their hard-earned assets, family businesses, or precious family valuables stay within their family and are protected from their child’s spouse.
For Example: A Plan to Protect
David and Martha want to make sure the inheritance they leave to their son, Sam, is protected from Sam’s wife. They have a wonderful relationship with Sam’s wife but would prefer Sam’s inheritance to stay within their family. They fear that Sam’s wife may remarry and inherit their assets, leaving their hard-earned assets in the wrong hands.
Thankfully, there are many ways to structure a plan to provide this protection. Without an estate plan the child will inherit through probate court proceeding. Once inherited, the child has freedom to share with a spouse.
For Example: Setting Up an Estate Plan
If David and Martha both pass away and Sam inherits the assets through probate court procedure, he is the new owner of all the assets. Let’s assume it is all money. He can turn around the very next day and deposit those monies into a joint account held with his wife. A few years later, they get a divorce, the wife claims ½ of the monies in that joint account as hers. This is a result that the parents did not intend. Let’s say Sam does all the right things. He opens a separate bank account in his name alone and deposits the money there. Sam dies unexpectedly and his wife probates his estate through the courts. She ends up with a portion of the money as his lawful spouse. Again, this may be a result that Sam’s parents did not intend.
But, with an estate plan, the parents can structure many different types of trusts depending on how they want Sam to have his inheritance, with the goal of protecting against Sam’s wife. For example, a lifetime trust that lasts during the lifetime of the child and passes to the next generation of beneficiaries after the child’s death could be a great type of trust to use if the inheritance is large. A generation skipping trust helps reduce estate taxes and protects against commingling in a marriage, thus protected from the child’s spouse or ex-spouses. At the child’s death, they trickle down to his children.
With an estate plan, the parents can structure a simpler trust with Sam as beneficiary (this is in scenarios where it is an average estate) and if Sam is not alive, to the grandchildren, as a contingent beneficiary. California is a community property state, which means that an inheritance from parents is considered a separate asset. Separate assets do not belong to the marriage. The child can protect that asset by keeping it separate and creating a trust of their own.
Conclusion
So sometimes, with a simple estate plan, a strongly worded conversation, and understanding of legal rights, a family is able to keep the assets within their family tree as requested by parents.
Contact our office for a consultation to find more ways to protect your assets. Or, if you have inherited assets from loved ones and you want to protect it from your spouse, feel free to reach out to schedule a free consultation.
