How To Protect Your Children’s Inheritance If You Remarry
Careful estate planning can help protect your children’s inheritance from previous marriages or relationships. Some of these steps include giving assets directly to children, creating a trust for the children, beneficiary designations, and purchasing a life insurance policy for your children.
Parents who remarry later in life face the challenge of protecting their children’s inheritance. They may worry, “What will happen to my son or daughter from a previous marriage or relationship, if I pass away before my spouse?” Careful estate planning, especially in a blended family, can solve some of these issues and ensure that both the current spouse is provided for and that the children receive a portion of their parents’ legacy.
You Need an Estate Plan in Place
The most important thing to know is that you need to have an estate plan in place to make sure your assets are distributed in the way that you desire at your death. Each state has its own laws about the distribution of an estate when a person dies intestate—that is, without a Will in place. In Georgia, if you die without a Will, the Court will determine that your spouse must inherit at least 1/3 of your estate—regardless of how many children or heirs you have.
Planning for every member of your family’s future ensures that your wishes are met.
Give the money or assets directly to your children
One way to safeguard your children’s inheritance is by giving it to them directly. You can gift the money or assets to your children in your Last Will and Testament. A Last Will and Testament, also simply known as a “Will”, is an estate planning tool in which you lay out exactly how you want your estate to be distributed. This can include cash, real estate, personal effects, and other items of monetary or sentimental value. You name beneficiaries to receive said assets, and you name an executor to make these distributions. Upon your death, the Will would pass through the probate Court system until the estate is fully administered—meaning that all debts have been paid out of the estate and distributions have been made.
Another option is to gift the money or assets to your children while you are alive; which also allows you to watch them appreciate and enjoy their inheritance. It is important to note, however, that the current estate and gift tax may affect any direct financial gifts.
Create a Trust to Protect your Children’s Inheritance
A trust is an estate planning tool that allows you to name beneficiaries of your estate and specific terms under which your children can receive assets from your estate. Many people assume that trusts are only for the wealthy, but trusts can serve families of all incomes!
By creating a trust for your children, you can ensure that there are money or assets available for your spouse during his or her lifetime, with the remainder distributed to your children upon the death of your spouse. There are several ways to set up this kind of trust concerning who receives the net income of the trust, who can take money out of the trust (and when, how much), as well as set specific distributions to your spouse or children. Just be careful about the trust language, especially whether it will pay for the surviving spouse’s long-term care (which could end up depleting the trust before your children have access to it).
Trusts come in all shapes and sizes—just like families. It’s important to know your options, and we always recommend involving a skilled attorney to not only assist you in the preparation of these important documents, but also to guide you as you make the best decisions for your family.
You can learn more about setting up a trust for your children and the mistakes to avoid here.
Beneficiary Designations
If you plan on leaving your estate to your spouse, either outright or in a trust, an alternative could be designating your children as beneficiaries on certain accounts you hold. These could be bank accounts, investments, or life insurance policies. Beneficiary designations on these types of assets allow you to do exactly that—name a beneficiary to receive these assets upon your death. Insurance policies, IRAs, or 401(k) policies are assets not governed by a Will so will not go through the probate process.
It is important to remember to review your beneficiary designations from time to time to ensure that they are correct.
Purchase life insurance for your children
Purchasing a separate life insurance policy to leave to your children after your death is another way to provide for them. In this scenario you could Will any or all of your estate to your surviving spouse, purchase a life insurance policy specifically for your children, and name them as the beneficiary of the policy. Because life insurance requires a beneficiary designation, the probate court does not considered it part of your estate, Soupon your death, the life insurance company will distribute the policy funds to those named as beneficiaries. In this case, your child or children.
If you decide to go this route, it is important to know that you may need your spouse’s permission to name your children as beneficiaries of some of these policies.
If you want to protect your legacy for your children, it is a good idea to take the additional steps to create an estate plan. It will give you the peace of mind knowing that both your spouse and your children will be protected and provided for. If you are interested in setting up a consultation, contact Siedentopf Law via our website or by calling us.
© Sarah Siedentopf and Siedentopf Law, 2018. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Siedentopf Law and EstateLawAtlanta.com with appropriate and specific direction to the original content.
