Is there a way to ensure that my son's greedy wife doesn't walk off with his inheritance?
Most parents don't have much say — at least in countries like the United States, where the concept of arranged marriage has never really taken off — in their child's choice in mate. But with careful estate planning, they can control whether their child's spouse enjoys a share of an inheritance they leave behind.
"It's a very common problem, but it can be solved by the parents implementing trusts in their estate plan," says Deborah Lauer, an estate-planning attorney and associate vice president at brokerage firm A.G. Edwards in St. Louis, Mo. The wealthy use trusts to avoid or minimize the estate tax, which currently affects estates of $1.5 million and larger. But trusts can also be used by those with smaller estates who are looking to retain control over how assets are distributed and used by beneficiaries.
With a trust, the beneficiary doesn't own the assets outright, but rather is subject to the approval of a trustee when taking withdrawals. For larger estates, that trustee might be a corporation, such as a law firm or a brokerage house. (Each firm will have its own minimum investment requirements, but demanding assets of $1 million or more is not unreasonable in this field.) For smaller estates, the trustee might be a family member or close family friend. In some cases, two trustees are named.
A trust can remain intact throughout the lifetime of the child, and can contain specific language detailing the precise circumstances under which withdrawals can be made. For example, distributions could be expressly limited to pay for the adult child's health and education expenses. Trusts can also be structured so that, even once the adult child dies, the gold-digging spouse still won't inherit the assets. One way to do this is to use something called a "generation-skipping trust," explains Andrew DeMaio, an estate-planning attorney with Neff, Aguilar, Cox, Magee and DeMaio, in Red Bank, N.J. With these types of trusts, assets are left to the grandchildren (the third generation), with the adult child (the second generation) typically receiving the income from that trust over his or her lifetime.
Keep in mind that, once a distribution has been made, there's no way to prevent a child from sharing the wealth with his or her spouse. And if those distributions are commingled with the couple's other assets, they would be fair game during a divorce. That said, the assets that remain in the trust are rarely accessible during divorce proceedings, says Ed Koren, chair of the Real Property Probate and Trust Law Section at the American Bar Association. (This varies by state and by the construction of the trust itself.)
Now, the question is, just how badly do you want to make sure that your digging daughter-in-law never strikes gold? As you might have surmised, creating a trust means pulling out the big guns. It's likely to cost at least $1,000, and perhaps significantly more, and it's absolutely essential that you find a competent estate-planning attorney to help with the trust's creation. "Not everyone wants to go to the extent of having a trust," says DeMaio, who notes that trusts come with trade-offs. Yes, parents are able to ensure that their daughter- or son-in-law never accesses the money. On the other hand, the child never gets full control over the assets, either.
Generally speaking, parents are advised to discuss the terms of their wills with their inheritors. "Nobody likes a surprise at a very emotional time," says A.G. Edwards' Lauer. Needless to say, parents struggling with this issue might not only want to find themselves a good lawyer — they might also want to find a good family therapist.