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 (in this case it would be distributed to various charities). This trust (which only becomes effective after client dies and the Will is probated) is similar to the type of trust protecting most of Prince Harry’s assets in the event of divorce (see that story in this month’s newsletter). 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. If interested in knowing how to meet your goals you might consider one of our next free Estate Planning Essentials Workshops on April 19, 2018 by calling (214) 720-0102 or signing up online here.