Estate Planning Blog Articles

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estate planning

How Do I Keep My Spendthrift Son-in-Law from Getting the Money I Give my Daughter in My Estate?

Say that you were to name your daughter as the beneficiary on your Roth IRA and 401(k) accounts, as well as your house and other investments. Her husband would not be a beneficiary.

His only source of income is a monthly stipend that he receives from a trust and earned income from being a rideshare driver. He has at least $5,000 in credit card debt.

Can Mom use a “bloodline trusts” to prevent her son-in-law from inheriting or getting her money when she dies?

Nj.com’s recent article entitled “Can I protect my daughter’s inheritance from her husband?” explains that “bloodline trusts” were created for this very reason.

Note first that retirement assets can’t be re-titled to a trust. However, a home can be, and investments can be, if they’re not tax deferred.

For assets that can’t be re-titled to the bloodline trust during your lifetime, you can name the trust as the payable-on-death (POD) beneficiary of those assets.

You also should take care in deciding on who you choose as a trustee.

In the situation above, depending on applicable law for your state of residence, the daughter may not be the sole trustee and the sole beneficiary under this form of trust arrangement. However, in all instances, a bank or attorney can be a co-trustee.

This trust arrangement ensures that assets distributed to the daughter aren’t commingled with the assets of her husband with extravagant tastes and an open checkbook. In addition, those assets would not be subject to equitable distribution in the event of a divorce.

If the daughter is the sole trustee over a bloodline trust, then all the planning will be out the window, if the daughter does not agree to this set-up.

For example, if she takes distributions from the trust and deposits them in a joint account with her husband, the money is available for equitable distribution.

This means the daughter arguably has indicated that she does not think of her inheritance as a non-marital asset.

A divorce court would see it the same way and award a portion to the husband in a break-up.

Reference: nj.com (July 21, 2020) “Can I protect my daughter’s inheritance from her husband?”

update a will

When Exactly Do I Need to Update My Will?

Many people say that they’ve been meaning to update their last will and testament for years but never got around to doing it.

Kiplinger’s article entitled “12 Different Times When You Should Update Your Will” gives us a dozen times you should think about changing your last will:

  1. You’re expecting your first child. The birth or adoption of a first child is typically when many people draft their first last will. Designate a guardian for your child and who will be the trustee for any trust created for that child by the last will.
  2. You may divorce. Update your last will before you file for divorce, because once you file for divorce, you may not be permitted to modify your last will until the divorce is finalized. Doing this before you file for divorce ensures that your spouse won’t get all of your money, if you die before the divorce is final.
  3. You just divorced. After your divorce, your ex no longer has any rights to your estate (unless it’s part of the terms of the divorce). However, even if you don’t change your last will, most states have laws that invalidate any distributive provisions to your ex-spouse in that old last will. Nonetheless, update your last will as soon as you can, so your new beneficiaries are clearly identified.
  4. Your child gets married. Your current last will may speak to issues that applied when your child was a minor, so it may not address your child’s possible divorce. You may be able to ease the lack of a prenuptial agreement, by creating a trust in your last will and including post-nuptial requirements before you child can receive any estate assets.
  5. A beneficiary has issues. Last wills frequently leave money directly to a beneficiary. However, if that person has an addiction or credit issues, update your last will to include a trust that allows a trustee to only distribute funds under specific circumstances.
  6. Your executor or a beneficiary die. If your estate plan named individuals to manage your estate or receive any remaining funds, but they’re no longer alive, you should update your last will.
  7. Your child turns 18. Your current last will may designate your spouse or a parent as your executor, but years later, these people may be gone. Consider naming a younger family member to handle your estate affairs.
  8. A new tax or probate law is enacted. Congress may pass a bill that wrecks your estate plan. Review your plan with an experienced estate planning attorney every few years to see if there have been any new laws relevant to your estate planning.
  9. You come into a chunk of change. If you finally get a big lottery win or inherit money from a distant relative, update your last will so you can address the right tax planning. You also may want to change when and the amount of money you leave to certain individuals or charities.
  10. You can’t find your original last will. If you can’t locate your last will, be sure that you replace the last will with a new, original one that explicitly states it invalidated all prior last wills.
  11. You purchase property in another country or move overseas. Many countries have treaties with the U.S. that permit reciprocity of last wills. However, transferring property in one country may be delayed, if the last will must be probated in the other country first. Ask your estate planning attorney about having a different last will for each country in which you own property.
  12. Your feelings change for a family member. If there’s animosity between people named in your last will, you may want to disinherit someone. You might ask your estate planning attorney about a No Contest Clause that will disinherit the aggressive family member, if he or she attempts to question your intentions in the last will.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

estate plan check up

A Non-Medical Check Up – For Your Estate Plan

An estate plan isn’t just for you—it’s for those you love. It should include a will and possibly, trusts, a power of attorney for financial affairs and a health care directive. As many as 60% of all Americans don’t have a will. However, the COVID-19 crisis has highlighted for everyone the need to have those documents. For those who have an estate plan, the need for a tune-up has become very clear, says the article “Time for a non-medical checkup? Review your will” from the Pittsburgh Post-Gazette.

With any significant change in your life, a review of your estate plan is in order. Keep in mind that none of your estate planning documents are written in stone. They should be changed when your life does. COVID-19 has also changed many of our lives. Let’s take a look at how.

Has anyone you named as a beneficiary died, or become estranged from you? Will everyone who is a beneficiary in your current estate plan still receive what you had wanted them to receive? Are there new people in your life, family members or otherwise, with whom you want to share your legacy?

The same applies to the person you selected as your executor. As you have aged over the years, so have they. Are they still alive? Are they still geographically available to serve as an executor? Do they still want to take on the responsibilities that come with this role? Family members or trusted friends move, marry, or make other changes in their lives that could cause you to change your mind about their role.

Over time, you may want to change your wishes for your children, or other beneficiaries. Maybe ten years ago you wanted to give everyone an equal share of an inheritance, but perhaps circumstances have changed. Maybe one child has had career success and is a high-income earner, while another child is working for a non-profit and barely getting by. Do you want to give them the same share?

Here’s another thought—if your children have become young adults (in the wink of an eye!), do you want them to receive a large inheritance when they are young adults, or would you want to have some control over when they inherit? Some people stagger inheritances through the use of trusts, and let their children receive significant funds, when they reach certain ages, accomplishments or milestones.

Have you or your children been divorced, since your estate plan was last reviewed? In that case, you really need to get that appointment with an estate planning attorney! Do you want your prior spouse to have the same inheritance you did when you were happily married? If your children are married to people you aren’t sure about, or if they are divorced, do you want to use estate planning to protect their inheritance? That is another function of estate planning.

Taking out your estate plan and reviewing it is always a good idea. There may be no need for any changes—or you may need to do a major overhaul. Either way, it is better to know what needs to be done and take care of it, especially during a times like the one we are experiencing right now.

Reference: Pittsburgh Post-Gazette (July 27, 2020) “Time for a non-medical checkup? Review your will”

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