Westlake Village estate attorneys know that it’s not inherently bad if your son-in-law or daughter-in-law receives your child’s inheritance. After all, he or she is part of the family. Ideally, if an in-law ends up with the family’s money (say your adult child passes away first), it’s always the hope that the in-law will pass down whatever is left to your grandchildren down the road.

But in reality, nothing is certain. With multiple marriages, divorces, blended families of children and stepchildren, there is no guarantee that your child’s spouse will leave the family money to your grandchildren. Your son or daughter-in-law may not even have the option to leave the money to your grandkids—say in the case of remarriage where the new spouse is entitled to the assets of the spouse over the kids from a previous relationship.

Cases for unintended beneficiaries are very common. Once you recognize this risk, you still have the chance to do advance inheritance planning to prevent the worst from becoming a reality.  It starts by understanding the three ways that your family’s wealth could be lost.

1.    Through Inheritance

Perhaps your daughter has a will leaving everything she owns, including her inherited assets, to her husband. So, if she dies first, your son-in-law will own everything.

2.    Through Divorce

In the event of a divorce, your child’s spouse may, by law, acquire some rights in your child’s inheritance. While marital property laws vary depending on the state your child lives in, the following risk will still be present- that your child’s spouse will end up with the family money and divert it from your bloodline.

Here in California, we live in a community property state. All inheritances start out as separate property, even if the person receiving it is married. So, to start, a spouse does not have any rights. Where most people run into trouble is they take their inheritance and deposit it into an existing account that they share with their spouse, comingling it with their community property. As time goes on, it becomes difficult or even impossible to figure out what is inherited separate property and what is community property. Now, in the event of a divorce, an ex-son in law or ex-daughter in law has rights in the inherited property.

3.   Through Remarriage

In the event your son or daughter dies and the spouse remarries, the new spouse will stand to inherit the assets that were given to your in-law (that were once yours) without having to share any with your grandkids. This is more than just a “Cinderella” scenario…it’s actually a common estate planning problem that many blended families encounter.

One of the most effective ways to ensure that family money is left only to your children (or grandchildren) is to create a trust.  Instead of leaving an inheritance outright to your adult child, you will transfer your assets to the trust. A trustee of your choosing will then be responsible for making distributions from the trust in accordance with your wishes and instructions. The assets contained in the trust will not be divided in a divorce because the property belongs to the trust, not to your adult child.  And, you can stipulate that if something happens to your adult child, your grandkids can inherit the remaining assets, rather than an in-law. You can even create a “beneficiary controlled” trust, which will give you child full control over the trust assets while still protecting them.

Our Westlake Village estate attorneys can provide you with many options to help ensure that your children and grandchildren are properly provided for without the risk of losing the family wealth in a divorce or through subsequent marriages. Just call our law firm at (805) 409-3878 to set up a consultation to get started.

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Acorn Law

310 N. Westlake Blvd, Suite 100
Westlake Village, CA 91320

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