Q. I want to make sure my daughter’s husband can’t access whatever money she inherits from me. What’s the best way to do that?
A. Estate planning has a lot of moving parts. We want to make sure you consider the whole puzzle and not just one piece.
As you plan, you should break your accounts into two groups, said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn.
The first group should be accounts with designated beneficiaries, such as 401(k)s, IRAs, Transfer of Death (TOD) accounts and other retirement accounts.
“The designated beneficiary on an account bypasses your will,” Scheibner said. “For example, if your will states that all of your money is to pass on to your daughter, but your 401(k) primary beneficiary is an ex-spouse listed, your ex-spouse will get the money from your 401(k).”
He said it’s crucial to review the beneficiaries on your accounts to make sure they coordinate with your desires.
The second group are those with no beneficiaries. For these, your will directs where the assets go.
This would include checking and savings accounts and brokerage accounts, Scheibner said.
He said there are some strategies you can use to keep the money in your bloodline.
“You should first have a conversation with your daughter, to make sure that when the assets pass, she remains the sole title owner of the account,” he said. “This is simple for retirement assets, but if you pass on cash from a savings account, and she adds it to her joint checking account with her husband, it could be difficult to determine who owns the money if they were to separate — especially in a community property state.”
Another option is to set up a trust for your daughter.
A trust gives you the most control of the money after you pass, Scheibner said.
Although the trust would require an initial set-up fee and may be subject to higher income taxation, you could specify that this trust is for your daughter’s benefit only, he said.
But, she’d still need to work with the trustee of the trust in order to access the funds.
“Ultimately the best way to plan for your assets to remain with your daughter and within bloodlines, if you want that level of detail, is to work with your estate attorney to make sure your estate reflect your wishes,” Scheibner said.
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