How Can I Protect My Children’s Inheritance?
Parents who develop an estate plan often do so to provide for their heirs financially. In Columbia, MD and beyond, parents simply want to make sure their hard-earned assets, family heirlooms, and closely held businesses stay within the family. Indeed, one of the most common questions that clients ask is ” How can I protect my children’s inheritance? ” More specifically, many people want to know what cost-effective options are available to protect one’s children’s inheritance from a spouse in the event of untrustworthiness or divorce. Thankfully, there are many ways to structure your child’s inheritance to help ensure it will remain in the family for future generations. Let’s look at a few of the options now.
How Can I Protect My Children’s Inheritance? 3 Tools to Help
Below are a few estate planning tools to consider to make sure that your children’s inheritance is safe
- Create a Trust: A trust involves three parties: (1) the person creating the trust (you might see this written as the “settlor,” “trustmaker,” or “grantor.”), (2) the person or entity holding the trust property for the benefit of the beneficiary, known as the “trustee”, and (3) the person(s) that benefit from the creation of the trust, known as the “beneficiaries.” Choosing a trustee who is independent can be a great way to eliminate any arguments that one beneficiary has more control to receive assets than what is actually provided in the trust documents than other beneficiaries, a helpful situation when you have an untrustworthy son- or daughter-in-law.A lifetime trust is a type of trust that – as is evident from its name – lasts for the lifetime of the beneficiary and passes to the next generation of beneficiaries upon his or her death. It is commonly referred to as a “generation-skipping trust” and can also dramatically reduce or eliminate estate taxes. Assets in a lifetime trust are protected against commingling in the marriage and, therefore, cannot be pursued by a spouse. When assets are held by a trust your children – and, by extension, their spouses – cannot access these assets. Therefore, even in the event of a divorce, an ex-spouse cannot pursue them.
- Use Prenuptial Agreements. In addition to creating a trust to protect your children’s inheritance from an untrustworthy spouse, your children can use a prenuptial agreement as a tool for asset protection. A prenuptial agreement is a document that details an agreement between your child and his or her spouse about the characterization of assets owned at the time of marriage and those earned after marriage. This legal document also provides the couple to agree upon the division of assets in the event there is a divorce. Because enforceability of prenuptial agreements varies by state, it is important to seek the advice of a legal professional before drafting and signing a prenuptial agreement. It may be an uncomfortable suggestion to bring up with your children, but it can be an incredible benefit in the event of a later divorce.
- Other Planning Ideas: Beyond the actual legal tools, it is important for you to let your wishes be known to the family. One way to do this is to have a family discussion about your estate plan, explaining your intentions and reasons as to why it is set up in this manner. Additionally, using clear language in your estate planning documents that specify the intent or purpose in leaving the inheritance to benefit descendants – and not their spouses – can further solidify your wishes are followed. Finally, choosing a trustee that is independent will keep control over the funds in the trustee’s hands and not your child’s untrustworthy spouse. This will also allow you to manage or overcome any conflict that you may not have been expecting.
How Can I Protect My Children’s Inheritance? Bottom Line: Seek Out Estate Planning Help
If the words ” How can I protect my children’s inheritance? ” keep you awake at night, and you wish to make sure your descendants receive a portion of your estate, discuss these intentions with your children and devise an estate plan that will guarantee this desire is fulfilled after your passing. Whether you have no estate plan, or have one that more than a few years old, give Andre O. McDonald, an experienced Howard County estate planning attorney, a call today at (443) 741-1088 to schedule a consultation to create or update a plan to suit your goals.
DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL ADVICE.