Jan L. Warner & Jan Collins
Question: Ten years after my father died, my mother remarried. She was 64 and her new husband was 70. Each had two grown children. Although each had assets, neither would hear about a premarital agreement. Instead, they pooled their money to buy a new home, new furniture, and a new car. Deciding that they wanted to protect themselves during their lives and then their children, each signed a will stating that at the death of one of them, all assets went to the other for life and then to the all four children in equal shares. Although we were concerned, mother told us that we were fully protected.
When Mother died last year after only two years of marriage, we were shocked to learn that the house in which she invested and all her bank accounts belonged to her second husband -- not for his life, but forever. Although this is not what Mother intended, we were told by a lawyer that because of the way in which the assets were titled, we had no claim. Surely there should be something we can do to prevent him from getting this windfall.
Answer: Your situation is an example of "accidentally disinheritance" about which you can do nothing. Although many people think their will or a trust will determine how an asset passes at death, as you have learned the hard way, this is sometimes not the case. The way in which property is titled determines how a property passes, and sometimes this means that the intent of a will or trust is frustrated.
Here, we assume that when your mother and her new husband purchased their home, the lawyer probably asked if they wanted to house titled jointly with right of survivorship. They probably said "yes," not really knowing that at the death of the first spouse, the other spouse gets the property automatically -- not for life, but absolutely. We also assume that the bank accounts were established in a similar manner.
Bottom line: It is important to understand all options when an estate is planned, including the effect of how property is titled.
Question: Although I love my son-in-law dearly and although I don't have that much, I want to make sure that my only daughter and my two grandchildren receive my estate. I am afraid that if I leave everything to my daughter and she dies or they get divorced, my son-in-law will get what I intended for my grandchildren. And if he remarries, who knows where it will end up. I have read a couple of books about estate planning, but have not found any forms that discuss the solution to my problem.
Answer: You are correct in assuming that without some planning, your assets could well end up scattered to people outside of the family because of a divorce or an unexpected death of a child or other beneficiary.
Like many, although you like your son-in-law, you don’t want him to receive your assets should your daughter die or go through a divorce. For example, if you leave your assets to your daughter and she dies without a will, her husband would receive up to half of her estate -- including your assets. And if your daughter and her husband are like most spouses, their wills probably leave everything to the other.
And if your daughter divorces after you die, if she commingled your assets with marital property, her inheritance could well end up being divided by a judge.
If you want your estate to benefit only your children, their children, and their children’s children, you should consider creating a trust that will benefit only your lineal descendents. Through this trust, you can direct that it benefit only "my issue" or "my lineal descendents." Once created, you can fund the trust by gifts during your lifetime, by a bequest under your will, or by a distribution from your living trust at your death. You may also choose to use life insurance.
In the trust, you can direct your chosen trustee to pay out only certain specified benefits to your descendents and, in the trustee's discretion to invade the corpus of the trust– that is, the assets you choose to put in the trust. You should specifically list the types of benefits that you want your beneficiaries to receive – such as health, education, disability protection, education, travel, support under certain circumstances, etc.
By creating this type of trust, you can create a vehicle that will hold your assets and never pay a penny to an in-law. In this way, you can "divorce proof" your estate plan and guarantee that your assets will not be lost on account of the untimely death of or divorce of your children, grandchildren, or great grandchildren.
A final tip: When it comes to planning, we strongly suggest that you seek the assistance of a qualified lawyer. While books are great to give you the background, in our opinion, planning and document preparation should be handled by a lawyer.