I'm 75, divorced and my $1.3M house is paid off. I want to leave all of my money to my daughter — but how do I make sure my son-in-law never gets my money, even if she dies before him?

Sometimes a will isn't enough to protect your assets

The vast majority of Americans who create an estate plan use a will in order to specify who should inherit money and property. According to LegalZoom, more than 75% of all estate plans in America included a will in 2021, while just a little more than 18% used a different option called a trust.

The problem with a will is that you lose control over what happens to your money after you pass it on.

If the senior mentioned above were to leave their money with their daughter and she treated it as separate property, the daughter would keep the money if she and her husband were to get divorced. However, if the daughter were to mix the bequeathed money with marital assets — such as investing it in a shared home or putting it in a joint bank account — that money may be considered marital property, which means the son-in-law could be entitled to a share of it in the event of a divorce.

The daughter would also have the right to bequeath the money to whoever she wants, which would likely include her husband. So, if the daughter were to pass away first, the son-in-law could potentially inherit everything depending on how the daughter structured her own estate plan.

The senior mentioned above may not be very happy with this potential outcome — especially when you consider their $1.3-million house and other valuable assets.

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Put your trust in a trust

The good news is there are options beyond a will that you can use to have much more control over your assets and ensure they don't ever fall into the wrong hands.

One of your best options is to create a trust. Trusts can be used to legally protect a grantor’s money and property and can ensure those assets are distributed correctly based on the grantor’s wishes. A grantor must appoint a trustee, who will manage the assets on behalf of the beneficiaries who will eventually inherit the grantor’s assets.

There are several kinds of trusts that the senior mentioned above could potentially use to protect their assets:

• Revocable trust: Also referred to as a living trust, this option gives the grantor the ability to make changes to the trust at any time. The grantor has control over how and when beneficiaries receive their inheritance, and the grantor remains the owner of the assets in the trust throughout their lifetime.
• Irrevocable trust: This trust is similar to a revocable trust with two considerable differences: the grantor cannot make changes to the trust, and the grantor is no longer considered the owner of the assets in the trust once it’s been created. This kind of trust requires you to give up more control over your assets while you are alive, but provides you with stronger protection against potential creditors during your lifetime.
• Special needs trust: You might consider a special needs trust if you have a child or grandchild with a disability. This trust allows you to leave assets to said family members without affecting their eligibility for Medicaid or other government benefits. Unfortunately, gifting money or assets to a family member with a disability outside of a special needs trust could make them ineligible for government benefits such as Supplemental Security Income (SSI).
• Spendthrift trust: This option can be used for grantors who are bequeathing money and/or assets to a beneficiary who could potentially mismanage the funds. For example, a grantor may choose to set up a spendthrift trust for a beneficiary who has substance-abuse issues.

With a trust, you can provide detailed instructions for how assets are to be distributed. For example, you could specify that money is released to your daughter or grandchildren on a set schedule, or that your daughter receives an allowance from the trust during her lifetime while your grandkids inherit the rest.

You could also limit the use of the trust’s funds. For example, you can set up a trust that allows beneficiaries access to the funds only to pay for certain things like college, or a house.

Creating a trust is well worth your consideration, especially if you have more than $1-million in assets, as well as concerns about your son-in-law's potential access to inherited funds. The senior mentioned above could alleviate their concerns by working with an estate lawyer to put the right type of enforceable trust in place.