Inheritance partially lost in equitable distribution settlement
Frank and Patricia have a daughter, Mel, who marries Harry. While Harry is attractive and likeable, he has difficulty holding a job, and he is a poor money manager. Harry also likes to spend money lavishly, mostly on himself, rather than on Mel and the children. Mel’s parents die, and their estate is left to her. After several years of marriage, Mel and Harry divorce. Under the rules of equitable distribution, Harry receives half of Mel’s inheritance. Harry moves to another state and refuses to pay any child support for Frank and Patricia’s grandchildren.
Preserving your inheritance through Bloodline Trust
Sharon and Dave have a daughter, Lilly, who marries her high school sweetheart, Michael. Lilly and Michael have two children, Sandy and Kitty, and Michael has two children from a previous marriage. Michael is emotionally and physically abusive to Lilly, Sandy and Kitty. Sharon and Dave die. Two years later, Michael and Lilly divorce. Sharon and Dave had established a bloodline trust for Lilly’s benefit. Lilly is the trustee and is permitted to use the money for the health, education, maintenance, and support of herself and her children. When Michael files for divorce, Lilly automatically is removed as trustee, and her brother Don assumes that role. When the divorce ends, Lilly is reinstated as a trustee. The monies in the trust can be used only for Lilly and her blood descendants. Michael is unable to reach the assets in the trust.
Considering a Bloodline Trust
The old saying, We can pick our friends, but we can’t pick our family, is particularly applicable in the case of sons- and daughters-in-law. Often, our children choose wonderful, trustworthy spouses with whom we get along very well. But occasionally, they choose partners who cannot be trusted, leaving us concerned for the emotional and financial well-being of our children and grandchildren. A child’s poor choice of spouse can translate into a parent’s estate planning headache, particularly when there is a divorce. With 50% of all marriages and 60% of second marriages ending in divorce,1 this is not an uncommon dilemma. If you want to protect your child’s inheritance from an irresponsible spouse or ex-spouse, consider establishing a bloodline trust. A bloodline trust should always be considered when the son- or daughter-in-law:
Without a Bloodline Trust, what can happen?
Without a bloodline trust, a number of circumstances can put your child’s inheritance at risk.
Benefits of the Bloodline Trust?
A bloodline trust is designed to keep money in the family, protecting the inheritance of your children and their descendants. Bloodline trusts offer a number of important benefits:
Who Serves as Trustee of the Bloodline Trust?
Your child can serve as initial trustee of the bloodline trust or can share this responsibility with an independent co-trustee. At any time, your child can resign from the role of trustee. He or she will be removed from the role automatically in the event of a divorce or lawsuit and will be reinstated only when the divorce is complete, the divorce action is terminated, or the lawsuit is resolved. An independent successor trustee can be appointed by you in your will or trust, or can be nominated by your child. That successor trustee may be a financial institution or another child in the family.
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David Nelson and The Money Matrix Advice Pty Ltd (ACN 603 049 083) trading as The Money Matrix (ABN 62 603 049 083) Authorised Representatives of Synchron AFS Licence No 243313. Unless specifically indicated, the information contained in this email is general in nature and does not take into account your personal situation. You should consider where the information is appropriate to your needs, and where appropriate, see personal advice from a financial adviser. Authorised Representative of Synchron AFS Licence No. 243313.