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When preparing a will, it is not uncommon for awkward family dynamics to complicate the process.
Imagine Joan, a 73-year-old widow living in a $1.5 million house in Colorado with approximately $1 million in savings. Joan had recently begun making a will in which she wanted to leave her entire estate to her son Roger. But there was a problem – Joan didn’t want to include her daughter-in-law in the will.
In fact, if Joan had her way, she wanted to make sure Roger’s wife never got the money, even if she ended up outliving Roger. Joan and her daughter-in-law never got along, and she would have felt much better about her will if she had known that Roger’s wife would never get a cut of the cash.
According to a Psychology Today survey, this is quite common, with 15% of men and 60% of women saying they have a negative relationship with their spouse’s mother(1).
These awkward situations can make estate planning more difficult, but that doesn’t mean Joan can’t get her way.
Many Americans use wills to plan their estates and designate who should inherit their money and property. In fact, according to LegalZoom, more than 75% of U.S. estate plans include a 2021 will(2).
A will is an effective way to leave money and property to your children, but many Americans view writing a will as a retirement task. A recent Gallup poll found that 76% of Americans over the age of 65 have a will, compared with only 36% of Americans ages 30 to 49 (3). Making a will can protect your children if the unexpected happens, so waiting until retirement may be too late.
Many people put off making a will because it seems complicated and expensive. Finding an attorney, being present with witnesses, and budgeting for legal fees can all be stressful.
But Ethos Insurance can help take the stress out of the process. Ethos Insurance customers have free access to legally valid will writing tools. The process is secure and private, and you can complete your will online in under 20 minutes.
When you buy term life insurance from Ethos, you can quickly and easily create a will that reflects your values and responsibilities.
While a will is appropriate for general circumstances, it may not be the best option for Joan. The will did not allow Joan to control what happened to her assets after they were passed on. If Joan leaves her assets to Roger and he retains sole ownership, he will be able to keep his mother’s money and property even if he and his wife divorce.
But if Roger commingled his estate with his marital assets—for example, investing funds in a shared home or depositing money into a joint bank account—the funds may be considered marital property (4). This meant that Roger’s wife was entitled to her share of Joan’s assets upon divorce.
Additionally, inheriting Joan’s assets through a will would allow Roger to leave his estate to anyone he chooses, which could include his wife. If Roger dies first, it’s possible that his wife will inherit everything, depending on how Roger sets out his estate plan.
Joan may not be entirely happy with these potential outcomes, but there is another option that would give her more control over her assets to ensure they don’t fall into the wrong hands.
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One of the best options for Joan to consider is a trust, which would legally protect her money and property while ensuring that said assets are distributed according to her wishes. With a trust, the grantor (Joan) must appoint a trustee—who will manage the assets on behalf of the beneficiaries who ultimately inherit the assets.
Joan can use a variety of trusts to protect her assets:
revocable trust: Also called a living trust, this option gives the grantor the ability to change the trust at any time. The grantor can control how and when the beneficiaries receive the estate, and the grantor remains the owner of the trust assets during his or her lifetime.
irrevocable trust: This trust is similar to a revocable trust, but has two significant differences: the grantor cannot make changes to the trust, and once created, the grantor is no longer considered the owner of the assets in the trust. This type of trust requires the grantor to relinquish more control over his or her assets, but provides the grantor with greater protection against potential creditors.
special needs trust: If you have a disabled child or grandchild, you may consider a special needs trust. This type of trust allows you to leave assets to the family members mentioned above without affecting their eligibility for Medicaid or other government benefits. Unfortunately, gifting money or assets to a disabled family member outside of a special needs trust may make them ineligible for government benefits such as Supplemental Security Income.
Spendthrift Trust: This option can be used to leave funds and/or assets to the grantor for beneficiaries who may mismanage the funds. For example, a grantor may choose to create a spendthrift trust for a beneficiary with a substance abuse or gambling problem.
Through a trust, Joan can provide detailed instructions on how her assets will be distributed. For example, she could designate that a portion of the funds be released to Roger on a set schedule, or that Roger receive a stipend from the trust and leave the remainder to his children.
Joan can also limit the use of trust funds. For example, she could set up a trust fund that would only allow Roger access to funds for certain things, such as buying a home or paying for his children’s college education.
If you are in a similar situation to Joan and you have a substantial inheritance that you wish to distribute as you wish, then choosing a trust is a reliable way to ensure that your funds are used according to your wishes after your death.
However, setting up a trust can be a complex process – if you choose this option, it may be helpful to seek expert advice first.
Platforms like Range can help. Range provides comprehensive wealth management services, including complex tax situations, equity compensation and estate planning. Their streamlined, cost-effective platform offers high-net-worth individuals a way to manage their entire financial life in one place.
In addition to estate planning, Range also provides investment consulting services. While traditional advisors can charge fees of 0.5% to 2% of total assets under management (AUM), or $1,000 to more than $3,000 for more comprehensive plans, Range offers flat-fee pricing with 0% AUM fees. This is a fraction of what you would pay a typical financial planner.
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Even if your estate is smaller, working with a financial advisor can be an important part of your end-of-life planning – especially if you want to increase the funds you leave to your heirs.
Research from Vanguard shows that working with a financial advisor can increase net returns by about 3% over time. For example, if you start with a $50,000 portfolio, professional guidance could mean more than $1.3 million in additional growth over 30 years, depending on market conditions and your investment strategy.
Finding an advisor to guide you with your investing and estate planning is easy with Advisor.com. Their platform connects you with licensed financial professionals in your area who can provide personalized guidance.
A professional advisor can also help you determine how to balance your existing retirement portfolio and leave your assets to your family in a way that is consistent with your values.
Through Advisor.com, you can schedule a free, no-obligation consultation to discuss your end-of-life financial plans.
Creating a trust is well worth Joan’s consideration, but before taking action, she would be best served working with an estate attorney to establish the right type of enforceable trust.
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Psychology Today (1); Law Zoom (2); Gallup (3); ACW Law (4)
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
