How Do I Keep My 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 income he earns from being a rideshare driver.

Can you use a trust 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 trusts are very effective at accomplishing this goal.

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, your 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 your 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 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?”

Estate Planning Is for Everyone

As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, it’s important to remember that estate planning is for everyone, and having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.

Estate planning is for everyone
Estate planning is the most effective way to protect against life’s unforeseen events, no matter what stage of life you may be in.

For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.

Here are some milestones in life when an estate plan is needed:

Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, as proof that estate planning is for everyone, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All young adults need a general power of attorney and health care directives to allow their parents to step in and help, if something happens.

That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should also be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.

Getting married. Marriage unites individuals and their assets. For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be merged, and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.

When a child is born. When a new child joins the family, having an estate plan becomes especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.

Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.

If a divorce occurs. Divorce is a sad reality for about half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any beneficiary designations are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.

Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.

Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”

Prenups for Tech Entrepreneurs

Maybe you made your first million in a crowdfunded start up, and now you’re working with venture capitalists on your next big idea. If marriage is on your event horizon, do you need a prenup?

Not every tech-savvy entrepreneur makes millions, but many millennials are finding themselves in the right place, at the right time, with flush bank accounts. If that’s the case, says CT Post, in “Millennial Millionaires and Their Prenups-What They Need to Be Thinking About,” they need to think very seriously about having a prenup. Not very romantic? No, but with a lot to lose, you want to protect both spouses.

Stockbrokerarbitrationfraud4The use of prenups has increased five times in the past two decades for millennials, according to the American Academy of Matrimonial Lawyers (which defines millennials as those ages 18 to 34). Celebrities like Kylie Jenner and Justin Bieber have signed premarital agreements with their partners, and many young marrieds active in the startup world think that premarital agreements are a wise move.

A prenup lets entrepreneurs protect what they have worked so hard for. Up-and-coming millennials and entrepreneurs are waiting longer to get married. As a result, they typically have more assets, accumulated wealth from a 401(k) and stock options and possibly real-estate ventures. They could potentially lose a lot of what they've earned if a prenup isn’t put into place.

They also need to protect their intellectual property, and the very idea of a business has to be protected. For example, with Kylie Jenner and her makeup line, she decided to shield what assets she has now and those she’ll accumulate throughout her marriage. By doing this her business won’t be communal property subject to a marital separation agreement or divorce.

If you think a prenup is good for you and your fiancé, remember these guidelines:

Work with a business attorney. Your legal counsel must be business savvy and understand how to best plan for future contingencies. And each party has to have their own separate attorney for a prenup to be valid.

Plan ahead with a prenup. Don’t start arranging for a prenup a month before your wedding. If you have significant assets, it will take some time to draft.

Look at the details. Determine if your partner has offshore accounts. It also matters where you will reside. Some techies, originally from China or India, have international attorneys, which increases the time required to draft and finalize an agreement.

Every prenups is unique. There’s no one size fits all. There are many variables and they’re unique to each relationship.

Still not convinced? Imagine yourself suddenly single, with a demanding 24/7 job, children to raise and a house to run. If that would work better with a plan in place, then you need a prenup.

Reference: CT Post (November 5, 2018) “Millennial Millionaires and Their Prenups — What They Need to Be Thinking About”