All in the family

Financial columnist Liz Pulliam Weston

All in the family

Family dynamics play an interesting role in drafting an estate plan.

Every so often I meet with clients who, for whatever reason, just don’t like a son-in-law or daughter-in-law, and want to figure a way to keep their son or daughter’s inheritance in the family in the event of a divorce, death, or other unexpected life event.

Fear of a child’s divorce is a common problem in estate planning. Clients are concerned that the inheritance they leave their adult children will become community property subject to 50/50 division upon divorce. This simply isn’t the law in California.

California is a community property state.  But stocks, bonds, cash, property and other assets that are passed through inheritance to an individual are considered separate property – as long as they remain in the name of the recipient.

If your kids are careful with their inheritance, it won’t get lumped into the marital assets.  But this is where family dynamics come into the equation. They need to somehow resist the request of their wonderful, loving husband or wife to add his or her name to inheritance. This is the hard part.

Financial columnist Liz Pulliam Weston gave an excellent explanation of this subject in a recent article in MSN Money. Ms. Weston points out that some couples can’t imagine keeping separate assets, some remain pragmatically enthusiastic about individual accounts, and others incorrectly assume the law requires them to share.  The decision to keep an inheritance separate can take a great toll on the marital relationship causing a great deal of stress.

You can hope that your adult child would respect your wishes under pressure, but estate planning is all about creating peace of mind for now and later.  In such a situation, I might suggest that a trust be set up instead to ensure that whatever assets you leave go solely to those you intend.

Discussing these details with your attorney will better enable him or her to develop a plan that will best suit your life and your estate.