A woman found out she won’t inherit her husband’s $2M trust. Here’s what The Ramsey Show recommends
Eileen’s husband currently receives a trust check every three months. But the couple, who are both in their 60s, recently discovered that Eileen would not inherit her share if she died before he did. Instead, the $2 million trust will be transferred to the couple’s daughter, who is a descendant of the family.
Eileen won’t get anything. “We’re wondering if it would be ethical to ask him to split the inheritance if he dies before me,” Eileen, who lives in Albany, New York, said on a recent episode of The Ramsey Show (1).
But The Ramsey Show hosts tell Eileen it’s “disgusting” to ask her daughters for a share of her inheritance. Here’s what the couple can do instead (and what they should have done before).
Lineage trusts, also called dynasty trusts, are used to preserve family wealth, especially as blended families become more common. But most people have no idea that these trusts exist or what they actually mean in terms of the financial security of the surviving spouse.
According to an analysis by the Pew Research Center, approximately 1.8 million Americans will divorce by 2023, while two-thirds of divorced Americans will remarry (2). According to US Census Bureau data, more than one-fifth (21.2%) of cohabiting US couples have children from a previous relationship (3).
A trust bypasses the probate process and creditors cannot go after trust assets. More specifically, a lineage trust can also preserve family wealth for direct descendants (lineage), such as children and grandchildren, so that assets remain in the family (4).
The trust becomes irrevocable when the trustor (the person who created the trust) passes away. In other words, the terms are fixed and cannot be changed in any way.
A bloodline trust is designed to protect family wealth from, for example, a spouse who divorces a direct descendant and then remarries someone else. Thus, the family’s assets will not be transferred to the new spouse or stepchildren.
However, it also deprives the beneficiary’s spouse and other loved ones of the inheritance because they do not share the same blood.
It can also backfire. For example, if a couple has two children (one is adopted), the ‘lineal’ child will inherit the family fortune and the adopted child will receive nothing.
