Eileen\u2019s husband currently receives a trust check every quarter. But the couple, both in their 60s, recently discovered that if he dies before she does, Eileen won\u2019t inherit his share. Rather, the $2 million trust will pass on to the couple\u2019s daughter, who is next in his family\u2019s bloodline.<\/p>\n
Eileen will receive nothing. \u201cWe\u2019re just wondering if it would be ethical for us to ask her to split the inheritance if he pre-deceases me,\u201d Eileen, who lives in Albany, NY, asked during a recent episode of The Ramsey Show (1).<\/p>\n
But The Ramsey Show hosts tell Eileen that asking their daughter for a cut of her inheritance feels \u201cgross.\u201d Here\u2019s what the couple could do instead (and what they should have done earlier).<\/p>\n
Bloodline trusts, also called dynasty trusts, are used to protect family wealth \u2014 particularly as blended families become more commonplace. But most people have no idea these trusts exist or what they actually mean for a surviving spouse\u2019s financial security.<\/p>\n
While about 1.8 million Americans got divorced in 2023, two-thirds of divorced Americans marry again, according to an analysis from Pew Research Centre (2). And more than one in five (21.2%) U.S. couples who live together have children from a previous relationship, according to U.S. Census Bureau data (3).<\/p>\n
A trust bypasses the probate process and creditors can\u2019t go after trust assets. A bloodline trust, more specifically, can also preserve family wealth for direct descendants (the bloodline), such as children and grandchildren, so assets stay in the family (4).<\/p>\n
Once the trustor (the person who creates the trust) passes away, the trust becomes irrevocable. In other words, the terms are set in stone and it can\u2019t be modified in any way.<\/p>\n
A bloodline trust is designed to protect family wealth from, say, a spouse who divorces a direct descendent and then remarries someone else. That way, the family\u2019s assets won\u2019t be diverted to the new spouse or stepchildren.<\/p>\n
However, it also disinherits a beneficiary\u2019s spouse and other loved ones, simply because they don\u2019t share the same blood.<\/p>\n
It can also backfire. For example, if a couple has two children \u2014 one is adopted \u2014 the \u2018bloodline\u2019 child would inherit the family wealth and the adopted child would receive nothing.<\/p>\n
Story Continues <\/p>\n
Read More: 5 essential money moves to make once you\u2019ve saved $50,000<\/a><\/p>\n In most states, a surviving spouse has elective share rights (typically 30% to 50% of the estate) that can override a will \u2014 a law intended to safeguard the surviving spouse from being left with nothing (5).<\/p>\n But bloodline trusts are structured to avoid this. Many spouses, like Eileen, may not realize they don\u2019t have a legal right to those assets. And there\u2019s nothing her husband can do about it, either. As a beneficiary, he can\u2019t alter the trust or name other beneficiaries.<\/p>\n So should they ask their daughter, who is now 24, for a cut \u2014 if the situation comes to pass?<\/p>\n \u201cI personally would feel gross about doing that,\u201d said Ramsey co-host Ken Coleman.<\/p>\n Ideally, the couple would have purchased life insurance long ago to ensure the surviving spouse would be well taken care of (premiums are typically more expensive if you buy insurance later in life). Life insurance provides a guaranteed, tax-free death benefit with immediate liquidity (it doesn\u2019t go through probate).<\/p>\n But, Eileen and her husband had been counting on the trust money instead. Currently, they have about $350,000 in savings, including 401(k)s, with about $99,000 left to pay on their mortgage. Both plan to keep working during their 60s.<\/p>\n \u201cWhatever you guys can do over the next seven to 10 years to invest a lot of money, that\u2019s going to help you be far more comfortable in your 70s and 80s,\u201d said Coleman.<\/p>\n For example, instead of asking their daughter for a cut of her inheritance in the event of her father\u2019s death, they could take the trust money he\u2019s already receiving each quarter and put it into an account in his wife\u2019s name.<\/p>\n Coleman says their focus should be on investing as much as they can at this stage, which will \u201cturn into a sizable chunk\u201d and provide his wife with a comfortable retirement \u2014 should she outlive him \u2014 without having to rely on his family\u2019s bloodline trust.<\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n The Ramsey Show via YouTube (1<\/a>); Pew Research Center (2<\/a>); United States Census Bureau (3<\/a>); Trust & Will (4<\/a>); Sallen Law, LLC (5<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Eileen\u2019s husband currently receives a trust check every quarter. But the couple, both in their 60s, recently discovered…\n","protected":false},"author":2,"featured_media":367605,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,1125,177139,18110,268,85,46,266,267,2356,115427,177138],"class_list":{"0":"post-367604","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-dave-ramsey","10":"tag-eileen","11":"tag-family-wealth","12":"tag-finance","13":"tag-il","14":"tag-israel","15":"tag-personal-finance","16":"tag-personalfinance","17":"tag-robert-kiyosaki","18":"tag-surviving-spouse","19":"tag-trust-assets"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/367604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=367604"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/367604\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/367605"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=367604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=367604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=367604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}