When you leave assets to your children, you may intend for the property to stay in the family for many generations. However, a number of events that are out of your control could cause the assets to end up in the hands of complete strangers.
The following are some common ways that a portion of your assets could end up leaving the family:
- Your heir gets divorced
- Your heir predeceases their spouse
- Your heir’s creditors collect on their assets
Let’s look at a few examples to see how this can happen.
How Assets Travel After You’re Gone
Say you pass a small fortune to your only son, John, who is married to Sally. They have one child, Billy, who you would prefer to receive your assets when John passes away.
What if John and Sally divorce, and Sally later remarried and has other children? While inheritances should be separate property that is not subject to distribution in a divorce, assets can become commingled, making it hard to tell if they are part of the marital estate. Or John’s inheritance can be used to determine that he should make large alimony payments. Some of John’s inheritance could end up in Sally’s hands and with her family, who you never even met.
A similar situation can occur if John passes away shortly after you do, except in this case, Sally could receive all of the inheritance that John received. If she remarries and has other kids, she could leave some or all of her assets to the children from her second marriage, leaving Billy with a fraction or even none of the property you wanted him to receive.
On the other hand, if Sally passed before John, Billy may have received John’s full estate as an inheritance. In this way, the timing of your heir’s death could have an enormous impact on what happens to the property you leave him or her.
Dynasty or Inheritance Trusts
Trusts can be used to control what happens to assets after you’re gone. These are sometimes referred to as inheritance trusts or dynasty trusts. Essentially, the trust states that your child or children have total access to the trust property while they’re alive, but at their death, your grandchildren will become trust beneficiaries.
This strategy can be effective for protecting assets from your children’s creditors and keeping assets in the family. You don’t have to worry that a divorce or death of one of your heirs will cause unintended consequences.
Talk to your estate planning attorney about this and other strategies for making sure your assets stay in the family.
At King Law Office, we understand that your estate plan should be designed to fit your objectives and family situation. Our goal is to help guide you through this process and listen to your concerns. Come visit us at one of our multiple office locations in North and South Carolina.