Wife does not want her inheritance to go to step-son

Wife does not want her inheritance to go to step-son

by Rachel Li on Oct 25, 2018

By Len Tillem and Rosie McNichol, Elder Law Attorneys in Sonoma.

SF Chronicle Section D4 Monday September 10, 2018 – Elder Advocate
 

Dear Len & Rosie,

My husband and I already have a trust for all our property and bank accounts. I’ve just inherited from my father and have put this money into bank accounts under my name only and in banks where my husband and I do not have joint accounts. Our trust provides for an equal division among my son, my daughter and my step son. I do not want to share my inheritance with my step son. He is already inheriting money from his mother and grandparents. I have listed my husband, daughter and son as equal beneficiaries, if I die on my separate property accounts. Do I need a separate trust in my name only for my bank accounts or will my beneficiaries listed at bank be given the money without probate?

Bonnie

It’s natural for you to want to provide for your own children from your separate property. Most people don’t leave much to their step-children. If you had raised your step-son from when he was a child, you probably would cut him in for a share. Keeping your separate property in a different bank than where your husband keeps your other accounts is a very good idea. If it was all at the same back, there’s a good chance your husband could inadvertently gain access to your separate property accounts over the internet.

Your method of designating pay-on-death beneficiaries for your separate property accounts will likely work. However, pay-on-death designations cannot properly take into account what should happen if your son or daughter were to die before you. If that happened, your husband and surviving child would receive the accounts and any grandchildren who survive their parents death will get nothing. That may not be what you want. Pay-on-death beneficiary designations are also a bad idea if you have a disabled child who would lose public benefits if he or she inherited money outright from you, or if you have a spendthrift child who can’t be trusted with managing an inheritance.

As an alternative you could either create a revocable trust solely to hold your separate property, or you could amend the joint trust you created with your husband to distribute your separate property in the manner you wish upon your death. Most well drafted trusts for married couples allow either spouse to amend either spouse to amend the trust alone with respect to that spouse’s separate property. If there’s a lot of money involved, you should not rely on pay-on-death accounts. But if your inheritance isn’t very large, it probably won’t make much sense to spend money creating or updating a trust to deal with a modest inheritance. Just make sure to keep up with your beneficiary designations if there’s a change in your family, such as a death, or birth, or if a child becomes disabled.

And don’t forget to keep your separate property separate. That means you should not ever put any community property money, such as savings from your paycheck, into your separate property accounts.