I love weddings. They’re full of love, dancing, and let’s be honest, I always take seconds of the cake! Many of my December evenings are spent watching the cheesy love-story Hallmark movies. What can I say, I’m a hopeless romantic. That is, until my attorney brain quickly takes over and I start thinking about the potential issues which could arise from an estate planning perspective. One of the main issues I see involves inherited property.
If you inherit land and want to ensure the real estate stays within your bloodline, consider putting the inherited asset inside of a Revocable Trust. With this strategy, you maintain complete control during your lifetime and can dictate how the land is distributed upon your death. If you are married, you may elect to have the income from the land paid to your spouse, and then upon his or her death, the land can be distributed to your children or siblings.
This is especially important in second marriages, or when families are blended. Many people may still want inherited assets to provide income for a surviving spouse, but want to ensure the family lineage is kept intact once the surviving spouse dies. Likewise, even if the family is not blended, a Last Will and Testament in and of itself may not uphold the client’s intent. Consider the following example:
John and Mary have been married for thirty years. They have three grown children. John inherits farmland from his parents. John’s Will provides that when he dies, all assets are to be distributed to Mary, but if Mary does not survive him, then the assets are to be distributed to their three children. John dies first, and the land is distributed to Mary as provided in John’s Will. Eight years later, Mary remarries. Mary updates her Will to provide that all property is to pass to her surviving spouse. Mary then dies and her second husband receives the inherited land from John’s family. John is now rolling over in his grave! Additionally, John and Mary’s three children are very upset knowing their father’s wishes were not respected.
Without stipulations in John’s Will regarding the inherited land, John’s wishes may be completely disregarded, primarily because his Last Will and Testament did not contemplate the potential of his widow remarrying.
Another issue to think about when it comes to inherited property is how you title the asset. If John inherits the land and adds his longtime, devoted spouse to the deed, that land automatically gives Mary rights to the land, regardless of what John’s Will states. In other words, titling of the asset trumps the Will. Even though John may love and trust Mary implicitly, he could avoid several potential problems by keeping the land in his name and providing in his Will or Trust that if Mary survives him, she is to receive the income from the land, but then the land be distributed to their children upon Mary’s death. When clients inherit property, whether it be land or cash, I make a point to explain this to the client so he or she fully understands the potential ramifications of adding his/her spouse to the inherited asset.
To that end, we all know not all marriages survive. By adding a spouse to the inherited land or liquid asset, the property becomes marital in nature. This means when the couple divorces, the inherited property is up for grabs.
All-in-all, despite newlyweds promising “until death do us part,” even the fairytale marriages which do end upon death may not result in respecting the wishes of the first spouse to die. The fix is generally relatively easy, but it does require forecasting potential issues and sound estate planning.
The information contained above is for informational purposes only, and is not legal advice or a substitute for legal counsel. You should not act or rely upon this information.