You might be surprised to hear that probably one of the top five questions we get when people come into our office is how do I keep my son in law and my daughter in law out of my estate? It's not necessarily because my clients do not like their son in law or their daughter in law, which is entirely possible, it could be just that they're afraid that once they get a lump sum of money, that you have worked your entire life to accumulate, that they are gonna blow it on something frivolous as soon as they receive it.
But I think one of the main reasons that people want to keep their son in law or their daughter in law out of their estate fund is because one, they want to protect their children and two, they want to protect their grandchildren. Now some clients have said, as long as my son or my daughter keeps their inheritance completely separate from their spouse, then it should remain separate property and the key word there is should but there is so many different scenarios where that money can be co-mingled and unfortunately make it part of the marital estate.
So how do we fix this problem? Well, there is a few ways. One of them we just talked about and that is making sure that your son or daughter is completely steadfast in making certain that their inheritance is always kept 100% separate from their spouse. But, you always run the risk of that money getting co-mingled. So you need to plan carefully when you decide to go that route.
Another way to do this is to create a revocable living trust in which you name a third party to be the trustee after you pass away, and then you can still name your son or daughter as the beneficiary but maybe they only get a little bit of money every so often, so that the spouse does not have access to all of the money.
And then, if your son or daughter passes away, the remaining balance of their inheritance goes to your grandkids. That also brings up another way to work around the problem and that is to again name a third party as the trustee and name your son or daughter as a beneficiary but they only get the income from the trust during their lifetime and then when they pass away, your grandkids receive the remaining assets in the trust, which I think is the goal of most people, once they have grandchildren.
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