Here is the usual scenario: Divorcee (client) wants an estate plan so that all her assets pass upon her death to her unmarried adult child (who has no descendants), but she wants to make sure that such assets never pass to her manipulating and greedy ex-husband. Since client’s child is single and has no children, client is concerned that if her child survives her and receives her inheritance outright that client’s entire estate can pass to her ex-spouse upon the death of client’s child.
The solution to the problem is actually fairly simple. Instead of the child receiving the inheritance from the client outright, child could inherit in a trust created in her Will. The testamentary trust (which becomes effective only if client’s child survives her and the Will is approved by the court) would dictate how the assets pass upon a child’s death (for example, it could be distributed to various charities). Certain language was also included in client’s Will so that client’s IRA could be distributed to the trust created in client’s Will (so ex-spouse wouldn’t receive upon the death of the child) without immediate income taxation to the child as the trustee could stretch the IRA distributions over the life expectancy of the child. The client’s testamentary trust also gives the trustee guidelines and limitations on distributions from the trust.
Every client’s goals are different – ranging from long-term cost expenditures protection to tax savings to protection of client’s assets going to an ex-spouse as in this case. Whatever the concern, make sure your Will is up-to-date so that your estate is distributed according to your wishes. Some things to keep in mind when deciding whether to update your Will:
- Marriage, divorce or remarriage?
- Has there been a new heir (child) born? You now need to appoint a guardian in the event of your death and consider their inheritance.
- Death of Someone Named in Old Will?
- Substantial Increase or Decrease in Net Worth?
- Relocation to Another State?
- Tax Law Changes?
- Changes to Your Intentions?
Once you have your Will updated to reflect your most recent wishes, make sure to keep it in a safe place such as a safe deposit box. Also, be sure to let your family members know where it is located so there is no confusion when the time comes that it is needed.
And do not just store it and forget about it! A Will should be reviewed every three years to make sure your estate is still going to be distributed as you wish.