FAQs: I Want to Leave An Inheritance to My Child, But Not Their Spouse - Estate and Probate Legal Group (2024)

FAQs

How do I leave an inheritance to my child but not their spouse? ›

Perhaps the best way to keep your child's inheritance separate from their spouse's money is to put it in an irrevocable trust. To do this, you would: Transfer the inheritance (money, real property, other assets) into the trust. Name your child as beneficiary.

To begin the inheritance distribution process, you must submit the will through probate. After the probate court reviews the will, it's authorized to an executor, and the executor then legally transfers all assets—again, after settling taxes and debts.

Preserve your funds in a separate account, in your individual name, and do not commingle any marital funds in the account. Do not purchase jointly titled property. If you purchase any items with your separate funds, do not title the property jointly with your spouse.

You can create a trust during your lifetime or through your will and name your child as the beneficiary. You can also appoint a trustee who will be responsible for distributing the trust income and principal according to your instructions. A Trust can offer several advantages over leaving money directly to your child.

Estate planning tools like wills and trusts are the best options for leaving money to your children because you can outline how and when your children will receive the money. If the child is a minor, you can even dictate how they can spend the money.

As and from 9th October 2019, a child is entitled to a life time tax- free threshold of €335,000 in respect of gifts and inheritances taken from his or her parents. Where the aggregate of the gifts and inheritances received by a child from a parent exceeds €335,000, only the excess is charged to tax.

It is important to note that capital assets given during life take on the tax basis of the previous owner, when these assets are given after death, the assets are assessed at current market value. This may cause loved ones to miss out on tax benefits, such as a step-up in basis after your death.

In general, any inheritance you receive does not need to be reported to the IRS. You typically don't need to report inheritance money to the IRS because inheritances aren't considered taxable income by the federal government. That said, earnings made off of the inheritance may need to be reported.

What happens when you inherit money from parents? ›

Typically, the estate will pay any estate tax owed, with the beneficiaries receiving assets from the estate free of income taxes (see exception for retirement assets in the chart below). As a beneficiary, if you later sell or earn income from inherited assets, there may be income tax consequences.

Small inheritance ($20,000)

Even if you receive a modest inheritance—you have many options. One idea is to fund an emergency savings account. Experts recommend that you have six months of living expenses set aside for emergencies, and $20,000 would put you well on the way toward this goal.

The best method for parents to structure a wealth transfer to protect their child's inheritance is via a trust. One efective way to shield your family's wealth — whether from things like divorce or from anyone who may try to take advantage of them — is through a trust with a corporate trustee to oversee it.

Legal disinheritance

If neither community property nor the right of election applies, a surviving spouse may be disinherited completely. They can choose to contest the validity of the will itself, but otherwise they have no recourse.

Surviving Spouse: Inherits 100% of all community property always. Spouse and two or more children (of deceased): 2/3 of Separate Property. Children share equally of the 2/3 share.

But the fact of the matter is that in all 50 states, regardless of individual laws, federal law dictates that no inheritance is legally required to be shared with a spouse. However, even that blanket declaration can get muddled, based on how you handle your inheritance.