If you have children, your estate plan likely leaves some or all your assets to those children in the event of your death. You structured your estate plan that way to ensure that the assets you accumulated over the course of your lifetime remain in the family. Have you considered, however, that your adult child’s spouse could wind up with the assets you intended for your child? The Vero Beach attorneys at Kulas Crawford & Smith explain how a trust can help protect the inheritance you pass down to your adult child.
How Could My Child’s Spouse Get My Assets?
As a parent, you hope to welcome a sone or daughter-in-law into the family with open arms. Even if that comes to pass, and you fully approve of the man or woman your child married, that doesn’t mean you want them to end up with an inheritance earmarked for your child. Marriage, however, muddies the proverbial waters when it comes to ownership of assets and property. Imagine, for example, that you have an estate valued at $1 million and that you pass that estate down to your married son upon your death with the belief that the assets will eventually be passed on to your grandchildren. If your son later gets divorced, some or all the estate could be considered marital property subject to division in the divorce. Your daughter-in-law could also end up with the entire estate if your son passes away and leaves his entire estate to her in his Will. In both cases, there is no guarantee that your grandchildren will wind up with the estate assets. Using a bloodline trust to pass down your estate may be able to help.
How Can a Trust Help Protect the Inheritance Intended for My Adult Child?
A trust is a legal relationship wherein assets originally owned by one party are held by a Trustee for the benefit of third-party or parties. Established 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 categorized as either testamentary or living trusts. A testamentary trust comes into existence upon the Settlor’s death, activated through a provision in the Settlor’s Will. In contrast, a living trust takes effect once all legalities are in place and is administered during the life of the Settlor, though a living trust may continue to function after the Settlor’s death as well. A bloodline trust is a type of revocable trust that ensures assets will remain with your bloodline.
Once created, a bloodline trust can be funded with the assets and property that you intend to leave to your child(ren). When you pass away, the trust becomes irrevocable. The assets held by the trust are protected and cannot be accessed by creditors to satisfy debts. If your child goes through a divorce, the assets will be considered separate property and, therefore, not subject to division in the divorce. When the original bloodline trust beneficiaries (your children) pass away, any remaining trust assets will be distributed to your grandchildren or other blood descendants. In short, a bloodline trust ensures that your child’s spouse does not inherit your assets and that those assets remain in the family.
Do You Have Questions about How a Trust Can Help Protect an Inheritance?
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about how a trust can help protect the inheritance you pass down to your adult child, please contact the experienced Vero Beach estate planning attorneys at Kulas Crawford & Smith by calling (772) 398-0720 to schedule an appointment.
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