If Valentine’s Day results in the announcement of an engagement for one of your children, lawyers say it’s time to start thinking about how your own legal affairs are structured.
And while you’re at it, you may need to offer a little good old-fashioned parental advice for your googly-eyed child.
Once an engagement happens, the wheels start turning for the parents. “I typically see parents getting their wills drafted for the first time when their kids get married,” notes Lisa Wilcox of Wilcox Law in St. Petersburg, Fla., who practices business and wills & estates law.
“The parents [become] more concerned about identifying which family members should receive the high dollar value personal property in their estate,” she adds.
This can of course create tension if you don’t approve of your child’s official new Valentine.
‘Trust’ Your Child
In that case, Wilcox advises that the parents set up a living or revocable trust, in which assets like bank and stock accounts or real property are actually owned by the trustee – typically an institution or neutral third party named by the parent – and not the child.
“Ideally the trust assets are protected by the trustee of the trust and then paid or used for the benefit of the child,” she explains. But in order for that to work, the child must keep it all straight – especially in the event that the marriage doesn’t work out and the former Valentine tries to get at the trust.
“At that point, the child would then need to avoid co-mingling the trust assets with his or her marital assets,” Wilcox says.
Another way to try to limit your child’s inheritance to him or her solely, while married, is to make sure the trust has a “spendthrift clause,” which will say that the child – as the beneficiary of the trust – can’t “assign or convey his beneficial interest.”
“This type of trust language is supposed to prevent a beneficiary from squandering his inheritance,” Wilcox says. However, “there are many states in which the spendthrift clause will not protect the trust assets from claims asserted by the child’s former spouse for alimony or child support.”
Beware of ‘Controlling from the Grave’
If you choose to set up a trust for your now-engaged child, be mindful of the legal – and emotional – repercussions for him or her.
When John Palley, a probate estate planning lawyer with Meissner, Joseph & Palley, Inc. in Sacramento, Calif., sees cases in which clients can’t stand their son- or daughter-in-law and choose to “control from the grave” by holding assets in trust, he laments it.
“There is only so much you can do without harming your own child,” he warns. “I recently worked with a client who despised her daughter-in-law so much that she was greatly limiting what her son would get, as she didn’t want to risk his giving his wife anything.”
Parents of engaged children should also consider how to handle a closely-held family business in the event of the parents’ death. “In some cases, my clients have not given any consideration as to the structure and formalities of their business until their children get engaged,” Wilcox says.
Another thing you might ask your child about is whether he or she needs to think ahead. “We also determine whether there is a need for a prenuptial agreement,” says Wilcox.
Finally, if Valentine’s Day brought a question popped overseas, more parental advice may be needed. “If my clients’ children are planning to get married outside of the United States, then the laws of the country in which their children intend to get married need to be reviewed,” Wilcox recommends.
“The marriage laws and residency requirements for each country can vary substantially,” she says, adding that the U.S. Department of State’s website offers a great research tool for overseas nuptials.
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