A well-thought-out estate plan will help protect and grow your assets over the course of your lifetime to ensure that there are sufficient assets left at the end of your life to pass down to loved ones. For that reason, asset protection planning tools and strategies should be included in your estate plan. Some of the threats to your assets are well known; however, others are less obvious. An Indianapolis asset protection planning attorney at Frank & Kraft explains how your in-laws could be a bigger threat to your assets than you realize.
Asset Protection Planning
Working hard, saving what you earn, and investing wisely are all important aspects of the accumulation of assets. You must also, however, recognize potential threats to the assets you accumulate. Most people think to protect against some of the more common threats, such as divorce, business failure, or an economic downturn; however, there are other threats that should be considered and incorporated into an asset protection planning component within your overall estate plan.
The “In-Law” Threat
Most people don’t even recognize one of the biggest potential threats to their hard-earned assets – their in-laws. Not your spouse’s parents – your children’s spouses. The damage your daughter or son-in-law could do to the value of your estate assets is potentially devastating. Most parents amass assets with the hope and intention of passing at least some of those assets down to their children. Often, parents start the process of transferring their wealth while they are still alive using lifetime gifting tools and strategies. When done correctly, lifetime gifting can make a significant difference in the amount of federal gift and estate taxes your estate will owe after your death. Whether you make lifetime gifts or wait until after you are gone to pass down assets to your children, you need to recognize how your child’s spouse could threaten those assets.
When you make an outright gift to an adult child, whether as a lifetime gift or a bequest in your Last Will and Testament, the assets gifted become the property of your child. That can potentially mean the assets also become the property of your child’s spouse. Those assets are then subject to division in a later divorce or being squandered by a spendthrift spouse. Imagine how you would feel if you spent a lifetime building up your estate assets just to see them awarded to a son-in-law or daughter-in-law in a divorce, or to find that the same son-in-law or daughter-in-law lost the assets gambling.
Common Asset Protection Planning Mistakes
Just because the assets are considered an inheritance does not necessarily protect them in a divorce. If they are kept separate and apart throughout the entire marriage they may, indeed, be considered separate property and not be subject to division in a divorce. Often, however, an inheritance is co-mingled, sometimes without even realizing it, and becomes marital property subject to division in a divorce.
You also do not want to be in a position of trying to recapture assets after they are gone. For example, if your son or daughter-in-law has a substance abuse, gambling, or mental health problem the assets could rapidly disappear without your child’s consent. A court order to return the funds to your child won’t change the fact that they are gone and given how they disappeared it is unlikely your child will ever be able to collect on a court judgment.
You may adore your son or daughter-in-law right now; however, he/she could pose a serious threat to your assets in the future. Instead of making the mistake of ignoring that threat, address it in your estate plan now. One simple asset protection strategy that works when in-laws are a concern is creating an asset protection trust. By distributing your estate assets to your child through a trust, the assets cannot be co-mingled, nor can a son-in-law or daughter-in-law squander them during the marriage.
Contact an Indianapolis Asset Protection Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about how to protect your assets from the in-law threat, contact an experienced Indianapolis asset protection planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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