How to Safeguard Your Assets from Being Inherited by Your Child’s Spouse
If you have children, your estate plan likely designates some or all your assets to be passed on to them in the event of your demise. This arrangement is intended to secure the familial continuity of the assets you’ve accrued over your lifetime. While that is certainly a lofty and admirable goal, have you considered the possibility that your adult child’s spouse might end up with the assets intended for your child? To better explain, the Indianapolis attorneys at Frank & Kraft discuss how to safeguard your assets from being inherited by your child’s spouse.
Potential Scenarios of Asset Transfer to Your Child’s Spouse
You may be excited to welcome your son or daughter-in-law into the family after you find out that a wedding is in the future. Even if you approve wholeheartedly of your child’s chosen life partner, it doesn’t necessarily mean you desire them to inherit the assets designated for your child. Marriage complicates matters regarding asset and property ownership. For instance, envision having an estate valued at $1 million and passing it down to your married son upon your demise, anticipating that the assets will eventually be passed on to your grandchildren. If your son undergoes a divorce, some or all the estate may be considered marital property subject to division. Additionally, if your son bequeaths his entire estate to his spouse in his Will, she could inherit the entire estate in the event of his death. In both scenarios, there’s no assurance that your grandchildren will ultimately receive the estate assets. Utilizing a bloodline trust can be a strategy to address this concern.
The Role of a Trust in Asset Protection
A trust establishes a legal relationship where assets originally owned by one party are held by a Trustee for the benefit of a third party or parties. Created by a Settlor (also known as a Maker or Grantor), a trust involves the transfer of property to a Trustee appointed by the Settlor. Trusts are classified as either testamentary or living trusts. A testamentary trust comes into effect upon the Settlor’s death, activated through a provision in the Settlor’s Will. Conversely, a living trust takes effect once all legalities are in place and is administered during the Settlor’s life, potentially continuing after their demise. A bloodline trust, a type of revocable trust, specifically ensures that assets remain within your bloodline.
Establishing a Bloodline Trust for Asset Protection
Upon creation, a bloodline trust can be funded with the assets and property intended for your child(ren). Upon your passing, the trust becomes irrevocable, safeguarding the assets from creditor access to satisfy debts. If your child faces a divorce, the trust’s assets are considered separate property and are not subject to division. Upon the passing of the original beneficiaries (your children), any remaining trust assets are distributed to your grandchildren or other blood descendants. In summary, a bloodline trust guarantees that your child’s spouse does not inherit your assets, ensuring that the assets remain within the family.
Do You Questions about How to Safeguard Assets?
For more information, please join us for an upcoming FREE seminar. If you have additions questions or concerns about the best way to safeguard your assets from being inherited by your child’s spouse, contactan experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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