One question to think about in anticipation of meeting with the estate planning attorney is how to distribute or allocate the assets to the children. Most of these issues involved elements of Family Wealth Preservation. With Family Wealth Preservation, many couples desire to have an estate plan that, as best as possible, keeps the money available for the children and then grandchildren, while preventing “outsiders” from taking the assets away. Remember, any money distributed outright, directly to a child (or other family member) could be reachable by an outsider.
Who are these outsiders and how can they take the family wealth away from your children and the grandchildren? Outsiders can include a child’s spouse, a child’s former spouse, and a child’s creditor.
There are several ways the family wealth can be taken away from a child:
- A child gets divorced and loses half of his/her inheritance when the marital property is divided. In many cases, inherited wealth is not considered marital property for division in a divorce. But there are several ways in which the inherited wealth is transformed from protected separate property to dividable marital property. Also, while the inherited wealth might not be considered marital for division, sometimes the growth and appreciation of the wealth from the time it was inherited could be considered marital property for division. Many clients want their estate plan to protect the family wealth from a child’s divorce.
- A child dies after inheriting family wealth and has a will that passes everything the child has (like a normal will – including the inherited family wealth) to his/her spouse (your in-law). The in-law later remarries and then does a will that passes everything the in-law has (which include the family wealth) to the in-law’s new spouse, giving your grandchildren little to nothing. Many clients want their estate plan to keep the family wealth within the family and not allow it to pass outside to in-laws and their future spouses.
- A child is already in a second marriage and the in-law has children from a prior marriage. The child dies after inheriting family wealth and has a will that passes everything the child has (like a normal will – including the inherited family wealth) to the in-law. Later, when the in-law dies the in-law’s will passes everything the in-law has (which includes the inherited family wealth) to only his/her children from a prior marriage, giving the grandchildren little to nothing.
- A child has financial problems and loses the family wealth to his/her creditors. Many clients want their estate plan to protect the family wealth from a child’s creditors.
If you are concerned about protecting your family’s wealth, you will need to discuss your options with an experienced estate planning attorney. For decades, Martin Heller Potempa & Sheppard, PLLC has been helping clients with family wealth preservation issues across Tennessee. Contact us today for a free consultation.