Its no secret that the divorce rate in the United States is high and that a significant number of Americans have been divorced multiple times. Of course, we all hope the best for our children and their spouses--but the possibility that a child will divorce cannot be ignored, expecially for estate planning purposes. Imagine the following scenario:
Your child has been married for 15 years and has four lovely children. Although you would have made different decisions than your child made in many regards, he or she seems to be happily married and successful and you are happy for them. Suddenly, you start noticing that your son/dauther-in-law shows up less and less at your family get togethers. Before you even know what is going on, your child informs you of marital difficulties and a likely divorce. You are shocked (or maybe you aren't). This will cause an extreme hardship on your child and your grandchildren.
Now, let's change this hypothetical. Imagine you you pass away three years before the marital issues arise, and that you have a simple revocable trust stating that your children receive equal shares of your estate, outright. Your estate is administered smoothly. Your child applied their inheritance from you (which they received several months after your death) to pay off their mortgage (on their home they own in joint tenancy) and build their savings (by depositing it in their joint savings acount with their spouse). Now, when the marital issues arise, what happens to your child's inheritance? Unfortunately, there is a significant chance that their inheritance has now become so commingled with assets jointly owned with a spouse, that the inheritance (or a portion of it) will be subject to division in the divorce. This means that your ex-son/dauther-in-law will be enjoying your hard earned estate! I don't find many clients that think this situation is okay.
Surely there must be something that can be done!
There is. A well-drafted estate plan can retain your child's share of his or her inheritance in a continuing trust which is separate from his or her own assets, and definitely separate from assets jointly owned with a spouse. In the example above, such a trust could become an owner of a home. And, of course, funds could be maintained in a trust-owned savings account. While there is some additional administrative complexity to structuring an inheritance this way, it is usually nominal and cared for as part of administration of the estate. Also, the benefts (including the peace of mind that your children will inherit your assets) generally outweigh any administrative costs.
If this situation concerns you, call us for a free estate planning consultation. We will gladly help you create an estate plan that will protect your children from divorce.
As an estate planning attorney, I am frequently asked what a complete estate plan should include. Your complete estate plan should include:
1. Revocable living trust (if you have decided to go with a complete estate plan);
2. Last Will and Testament;
3. Durable General Property Power of Attorney;
4. Health Care Directive (in Utah, this is a Living Will and a Health Care Power of Attorney);
5. Property Agreement (if you are married);
6. HIPAA Waiver;
7. Other instructional documents (so you know the use of each of your estate planning documents).
All of your estate planning documents need to be kept in safe and accessible place so they can be found by the appropriate persons at the appropriate times. All of the estate planning documents prepared by our firm are placed in a binder for safekeeping.
Call us today to schedule your free estate planning consultation!
I recently met with a client who lost a sibling. The client, let's call him Bob, had previously lost two other siblings (who each left surviving children). Bob was from a Utah family of 7 children. He was in regular contact with most of his surviving siblings and was on good terms with them. However, Bob was not in contact with any of his nieces and nephews who were the children of his deceased siblings. In fact, he did not even know where they lived. Bob had encouraged his recently deceased sibling to care for her estate planning. Unfortunately, Bob's sibling either disregarded such encouragement, procrastinated for too long, or locked up her planning documents in safe deposit box without directions for access upon death. Regardless, we are now working on the probate for a relatively simple estate. Unfortunately, probate of this relatively simple (i.e., small) estate will end up being quite complicated because Bob's sister failed to leave any readily discoverable estate planning documents and because we now have to notify and deal with Bob's nieces and newphews, some of whom we are having trouble tracking down. Although Utah's simplified and streamlined probate laws make probates easier, this will not be an easy probate for Bob.
This is just one example of a situation that could have been easily prevented by proper estate planning. Bob's sibling could have avoided this entire probate burden through a Last Will and Testament (which would ease the probate burden) or basic trust (which could eliminate the probate burden entirely). Don't let this happen to your estate! Call our office today to schedule your free estate planningconsultation.