Have you given any thought to what you’d like to have happen to your assets and property when you pass away? For most individuals, they’d like to pass on their legacy to their spouse and then eventually their children and grandchildren. Unfortunately, without proper planning, this doesn’t always happen. Read our guide on bloodline planning to find out how you can guarantee your inheritance will pass directly to your heirs and not to strangers.
What is bloodline planning?
The Merriam-Webster Dictionary describes “a sequence of direct ancestors especially in a pedigree” as the bloodline definition.
In the world of estate planning, bloodline planning is described as the act of planning your estate such that your legacy will be passed down to your direct descendents.
You may be wondering, “why is this necessary,” and, “won’t my property pass automatically to my heirs?” These are great questions to ask.
In most cases, state laws are set up in such ways that assets and property are passed down to a decedent’s loved ones. However, unforeseen circumstances such as divorce, bankruptcy, and legal suits can interfere. Here are some potential causes for concern when leaving inheritances to your loved ones:
Inheritances can be diminished due to bad habits, such as overspending, gambling, drug addiction, or alcoholism.
All or part of the inheritance can be lost to creditors if a lawsuit is filed against one of your heirs
If your heir gets married and then divorced, half of their inheritance could go to their spouse as a result of the divorce process.
If your child were to pass away, their surviving spouse would inherit their estate. This may be a desirable outcome. However, if the spouse were to remarry, the inheritance could end up in the hands of a stranger. The inheritance would not necessarily remain in your direct line of descendants.
These are just a few real-life examples of when an individual's hard-earned legacy could inadvertently wind up in the hands of strangers. Further, inheritances could be lost or diminished such that they cannot be passed down to future generations.
Because of this, it’s best practice to err on the side of caution. Luckily, you can implement bloodline planning for your estate and make sure that the assets you leave behind will in fact be passed down to future generations in your direct lineage.
3 options for bloodline planning
Individuals who don’t have an Estate Plan are often putting themselves and their loved ones at risk. Without a Will or Trust to follow, assets may get distributed in a way that doesn’t align with their true wishes. This could leave loved ones vulnerable during a time already layered with grief and loss.
To ensure that your property and assets are passed down and remain within your bloodline after you pass away, set up your Estate Plan. Further, use estate planning tools that are specifically made for bloodline planning.
Here are 3 bloodline planning options to consider:
We introduce each of these tools below.
1. Bloodline Wills
A Bloodline Will is a type of Will that contains a Trust. The Trust is set up such that the assets and property you pass down will remain in your bloodline. Your beneficiaries are your children, their children, and so on and so forth.
The Trust leaves Trustees discretionary power, which means that laws do not force the Trustee to make distributions out of the Trust if they do not want to. If you appoint your children as both the beneficiaries and Trustees, they can use this flexibility to their advantage. For instance, if they are going through a divorce or just filed for bankruptcy, they can leave their inheritance in the Trust so that it remains protected.
2. Bloodline Trusts
A Bloodline Trust, introduced above, is a Trust that is designed with the intention of keeping an inheritance within your family after you pass away. The Trust is set up such that the inheritance is protected for your children, their children, and so on. Funds can only be used for the benefit of your named beneficiaries, but are inaccessible by third parties.
You could also set up your Bloodline Trust such that funds are to only be used for specific benefits to your children or grandchildren, such as healthcare or education. This is up to you to decide, but it can be a helpful mechanism to ensure your beneficiaries don’t squander their inheritances.
To keep learning about how Bloodline Trusts work, read our guide: What is a Bloodline Trust in Estate Planning.
3. Dynasty Trusts
A Dynasty Trust is a type of irrevocable Trust that is designed specifically to pass wealth down from one generation to the next. Further, it offers numerous tax advantages, such as sheltering wealth from gift tax, estate tax, and generation-skipping transfer tax. This is true as long as assets remain in the Trust, thus incentivizing family members to leave assets in the Trust for extended periods of time.
Click here to learn more about how Dynasty Trusts work and how they can benefit your multigenerational wealth planning.
Create your Bloodline Trust today
Planning for what should happen to your assets and property is relatively straightforward — until you start thinking about all of the possible scenarios that could happen (foreseen and unforeseen.)
Although it takes some effort, bloodline planning is the solution for protecting your legacy to make sure that it ends up in the right hands from one generation to the next. If you wish for your legacy to be passed down to your spouse and then ultimately your children and grandchildren, you must put a plan in place. Keeping your inheritance in your bloodline won’t happen automatically. Luckily, there are many estate planning tools available to help you achieve the outcomes you desire. Today, we discussed three great options, including a Bloodline Will, Bloodline Trust, and Dynasty Trust.
Trust & Will offers both Wills and Trust-based Estate Plans that will help you make sure your legacy will get passed down to the ones you love. Although a Will is a great place to start, we often recommend our Trust-based Estate Plan, which will provide you with the greatest level of flexibility, control, and protection over your property. Check out our Trust plan today!
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