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When preparing a will, it’s not uncommon for awkward family dynamics to complicate the process.
Imagine Alice, a 73-year-old widow who lives in a $1.2 million house in Colorado and has roughly $2.3 million saved. Alice recently began drafting her will and wants to leave her entire estate to her son, Max, and his two children — Ethan and Sarah.
But there’s a catch — Alice doesn’t want to include her daughter-in-law, Esther, in the will.
In fact, if Alice could have her way, she’d like to ensure that Esther never gets her hands on this money, even if she ends up living longer than Max.
Alice, who never got along with her daughter-in-law, would feel a lot better about her will if she knew her son’s wife would never get a cut of the cash. But like most grandmothers, Alice enjoys spoiling her grandchildren and wants to give them a nice head start in life.
According to a survey from Psychology Today, situations like this are fairly common, as 15% of men and 60% of women say they have a negative relationship with their spouse’s mother (1).
These awkward situations can make estate planning much more difficult, but that doesn’t mean Alice can’t get her way.
Many Americans use a will to plan their estate and specify who should inherit their money and property. In fact, more than 75% of all American estate plans included a will in 2021, according to LegalZoom (2).
A will is an effective way to leave money and property to children, but many Americans consider writing a will a retirement task. A recent Gallup poll found 76% of Americans over 65 have a will, compared to just 36% of those aged 30 to 49 (3). In the event that something unexpected happens, having a will protects your children, so waiting until retirement could be too late.
Many people put off making a will because it seems complicated and expensive. Finding a lawyer, having witnesses present and budgeting for the legal fees can feel stressful.
But Ethos Insurance can help take the stress out of the process. Ethos Insurance customers receive access to their legally valid will-writing tool for free. The process is secure and private, and you can complete your will online in under 20 minutes.
When you purchase term life insurance from Ethos, you can quickly and easily create a will that reflects your values and responsibilities.
While a will works well for the average situation, it might not be the best option for Alice. A will doesn’t allow Alice control over what happens to her assets after she passes them on. If Alice were to leave her assets to Max and he retained sole ownership, he would be able to keep his mom’s money and property even if he and his wife were to divorce.
But if Max were to mix his inheritance with his marital assets — for example, investing the funds in a shared home or putting the money into a joint bank account — those funds may be considered marital property (4). This means Esther could be entitled to her share of Alice’s assets in the event of a divorce.
And inheriting Alice’s assets through a will would allow Max to leave his inheritance to whomever he chooses, likely including his wife. If Max were to pass away first, his wife could potentially inherit everything, depending on how Max structured his own estate plan.
Alice likely won’t be very happy with these potential outcomes, but there’s another option that can give her much 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 Alice to consider is a trust, which can legally protect her money and property while ensuring said assets are distributed based on her wishes. With a trust, the grantor (Alice) must appoint a trustee — someone who will manage the assets on behalf of the beneficiaries who will eventually inherit them.
There are several kinds of trusts that Alice could potentially use to protect her assets:
Revocable trust: Also referred to as a living trust, this option gives the grantor the ability to make changes to the trust at any time. The grantor has control over how and when beneficiaries receive their inheritance, and the grantor remains the owner of the assets in the trust throughout their lifetime.
Irrevocable trust: This trust is similar to a revocable trust with two considerable differences: the grantor cannot make changes to the trust, and the grantor is no longer considered the owner of the assets in the trust once it’s been created. This kind of trust requires the grantor to give up more control over their assets, but provides the grantor with stronger protection against potential creditors.
Special needs trust: You might consider a special needs trust if you have a child or grandchild with a disability. This trust allows you to leave assets to said family members without affecting their eligibility for Medicaid or other government benefits. Unfortunately, gifting money or assets to a family member with a disability outside of a special needs trust could make them ineligible for government benefits such as Supplemental Security Income.
Spendthrift trust: This option can be used for grantors who are leaving money and/or assets to a beneficiary who could potentially mismanage the funds. For example, a grantor may choose to set up a spendthrift trust for a beneficiary who has substance abuse or gambling issues.
With a trust, Alice can provide detailed instructions for how her assets are to be distributed. For example, she could specify that portions of the money are released to Max on a set schedule, or that Max receives an allowance from the trust while leaving what’s left to his children.
Alice could also limit the use of the trust’s funds. For example, she could set up a trust that only gives Max access to the funds for certain things, like purchasing a house or paying for his kid’s college education.
If your situation is similar to Alice’s and you have a large estate you’re hoping to see disbursed according to your wishes, opting for a trust is a reliable way to ensure your funds are used as you wish after you pass.
However, setting up a trust can be a complex process — it can be helpful to seek expert advice first if you’re pursuing this option.
And even if your estate is smaller, working with a financial advisor can be a critical component of your end-of-life planning — especially if you’d like to grow the funds you’ll leave behind to your heirs.
Research from Vanguard shows that working with a financial advisor can add about 3% to net returns over time. For example, if you started 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 who can offer guidance on both your investments and your estate planning is simple 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 family in a way that aligns with your values.
The best part? Advisor.com’s roster comprises fiduciaries, meaning they’re legally obligated to act in your best interests.
You can schedule a free, no-obligation consultation to discuss your end-of-life financial plan.
Creating a trust is well worth Alice’s consideration, but before she makes a move, she’d be wise to work with an estate lawyer to put the right type of enforceable trust in place.
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Psychology Today (1); LegalZoom (2); Gallup (3); ACW Law (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.