Estate planning. It can get tricky pretty quickly. And one of the places it may get the hardest is when figuring out how your sons or daughters-in-law factor in. Different people have different relationships with their in-laws, and that will impact what you decided to do with your estate.
Some in-laws can be lovely and you can have a great relationship with them.
Dennis Fordham Law says that these in-laws can be really helpful for your estate. They explain:
“On the bright side, In-laws who are trustworthy, capable and willing might have a possible helpful role in assisting in the administration of your affairs. That assistance might be either for your own benefit or the benefit of someone else. For example, one might decide to name an in-law as his or her alternative agent and/or alternative successor trustee to act for his or her benefit under a power of attorney and trust, respectively, if and when one became disabled.”
If you have this type of son or daughter-in-law, then great! But some people have the opposite kind of relationship with their in-laws.
There’s a few different reasons why you might want to keep your in-laws out of your estate.
In fact, Paul Rabalais, of Rabalais Estate Planning, can list 6 off the top of his head! A few common reasons include:
- You do not agree with how your child and their spouse share or distribute their money. Perhaps, you notice that your in-law uses a large sum of your child’s paycheck to buy extravagances for themselves.
- Your child has stepchildren and you do not want your step-grandchildren to benefit from your child’s inheritance.
- Your family has a legacy of inheriting money through the bloodline, and it is important to you to keep that tradition intact.
- Or maybe, you just plain do not like your son or daughter-in-law.
- You want to protect your child’s inheritance in case of a divorce.
Because of all these reasons to not include your in-laws in your estate, Paul offers a few different strategies to keep them out.
First, just leave the inheritance to your child only.
This way, your child would be the only one who is able to access the inheritance. It becomes their sole property.
The problem with this is that the inheritance might somehow get mixed into the assets or joint account that your child shares with their spouse, meaning that if there is ever a divorce, the spouse would have equal claim to the inheritance too. Paul says this is an option, but you should be careful.
Or, you can leave your child’s inheritance in a trust for your child.
According to Investopedia, a trust is:
“A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.”
In this case, you would be the trustor, and your child would be the beneficiary and the trustee. In this circumstance, your child is the only person who is able to withdraw funds from the trust, making it slightly more secure that the money stays with them.
However, your child could still withdraw funds and place them in a joint account with their spouse.
The strongest way: leave a trust for your child, but name someone else as the trustee.
This is a twist on method #2. This way, you limit your child’s rights to access the inheritance, which in turn will limit your son or daughter- in-law. At this point, things get pretty specific, as you will have to decide for yourselves what you want your child’s withdrawal and distribution rights to be.
Don’t feel guilty, Paul says he sees instances like this all the time.
“A lot of people, really kinda surprised how many people are adamant about wanting their children to keep the inheritance, wanting to make sure the child doesn’t lose the inheritance due to a divorce or spousal influence. So there’s a right way and a wrong way to do it, but it’s really your call.”
And he says this type of estate planning can help your family a lot.
“The key here is don’t just put stuff off because it’s difficult, take some action, get it done, because of the uncertainty of life. You’ve worked your whole lifetime to save and build and you want to make sure it goes to the next generation.”
Watch the video below for more advice.
Note: Since Rabalias Estate Planning is based in Louisiana, some of these legal strategies may be specific to Louisiana law. It’s always best to speak with and attorney you trust to help make the wisest choices for your estate.
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