Ohio parents often desire to pass wealth to the next generation. Their intentions, however, might be frustrated if a married heir gets a divorce, taxes run high, real estate expenses become onerous, creditors make claims or young heirs act irresponsibly. Careful planning could install protections against these situations.
To manage the possibility of an heir getting a divorce, separate accounts could be set up to receive gifts or bequests. Ideally, a prenuptial agreement would be in place that declares that the inheritance will not be counted among marital assets. Capital gains taxes on a later sale might wipe out a good portion of a non-cash gift as well. Financial planners often advise people to make gifts of cash or stock that have minimal appreciation.
When parents want to help a child buy a home, clear expectations should be communicated about the child's responsibility to earn income and pay real estate expenses. Before co-signing the mortgage, a parent should think about what to do if the child fails to make payments. Creditors might also seek out gifted assets, which would be especially vulnerable within an account held jointly by parent and child. Alternatives to joint accounts that offer better protections include naming the child as account beneficiary or giving the child power of attorney. If a young person might receive a large inheritance, parents could choose to control access to the funds. A trustee could manage distributions and prevent overspending by a young heir.
When parents need advice about transferring their wealth, an estate planning attorney could evaluate their goals and research strategies for protecting assets. The use of a trust that ties distributions to the achievement of certain specified milestones by an heir might be one such suggestion.