Using Trusts to Keep Your Savings in the Family and Away from the In-laws

Our estate planning clients all want their hard-earned savings to benefit their biological family for generations to come. This can be a challenge when families have multiple children, some with children (grandchildren) and some without. You might worry about what happens to your assets if a child without children inherits, and then subsequently leaves that inheritance to a spouse or someone outside the family. Fortunately, trusts offer a powerful solution.

The Challenge: Protecting Your Legacy

Without careful planning, assets inherited by a child without descendants could ultimately pass to individuals outside your bloodline. For instance, if your child without children marries, their spouse could inherit those assets upon their death, potentially diverting them away from your family. This is a common concern I hear, and it's entirely valid.  You may be fond of your son or daughter-in-law, maybe even love them, but do you want them ending up with a substantial portion of your estate that otherwise could have gone to your biological grandchildren?  Presented with the choice, the answer is obvious to almost everyone.

The Solution: Strategic Trust Planning

A well-structured trust can prevent this scenario. Here's how:

Life Estate Trusts: 

You can create a trust that grants your child a "life estate." This means they receive the income and benefit from the assets during their lifetime. However, they don't own the assets outright. Upon their death, the trust assets pass to your designated beneficiaries, typically your grandchildren or other family members. This ensures your child is provided for, while preserving the principal for future generations within your family.

Dynasty Trusts: 

For a longer-term solution, consider a dynasty trust. This type of trust can last for many generations, shielding assets from estate taxes and protecting them from creditors or divorces of your descendants. It provides maximum control over how your wealth is managed and distributed throughout your family line.

Specific Provisions in the Trust Document:

The trust document itself is crucial. It should clearly state your intentions regarding who should benefit from the assets after your child's death. You can specify that the assets pass to your grandchildren, nieces, nephews, or any other blood relative you choose. You can also include provisions preventing the child's spouse or partner from inheriting those assets.

There’s an added benefit to these trust arrangements.  While in trust, your inheritance is protected in the event your child gets a divorce (think of the trust as a kind of prenup that your child doesn’t have to sign), has credit problems and suffers from an addiction.   

Why This Matters

Estate planning isn't just about distributing assets; it's about preserving your values and ensuring your wealth benefits those you intend to support. By utilizing trusts strategically, you can:

• Provide for all your children, regardless of their family situation.

• Protect your assets from unintended beneficiaries.

• Maintain control over your legacy for generations to come.

• Minimize potential estate taxes.

Take the Next Step

If you're concerned about keeping your savings within your biological family, I encourage you to contact one of our experienced estate planning attorneys. We can discuss your specific circumstances, explore the different trust options available, and create a customized estate plan that reflects your wishes and protects your legacy. Don't leave these important decisions to chance. Schedule a consultation today to safeguard your family's future.