Trust and Estate Counsel

Tennessee Estate Planning Law

Insight and commentary on estate planning issues impacting affluent residents of Tennessee

Payment of Health Care Expenses for Your Son-in-Law's Next Wife

One of my clients recently told me a story about a waylaid inheritance. In the 1980s, my client’s grandparents left an inheritance of $500,000 to my client’s mother. The grandparents loved their son-in-law and were not concerned that their daughter might die before their son-in-law and leave her inheritance to the son-in-law. In fact, the daughter died in 1993 and left her entire inheritance to her husband.

The daughter’s husband remarried in 1997. His second wife was stricken with cancer. He used all of his assets, including those that he had inherited from his first wife, to pay for medical expenses associated with his second wife’s cancer. When the son-in-law later died, he was virtually penniless. The bottom line is that the inheritance from the grandparents was used to pay for health care expenses of a woman whom the grandparents never met.  I doubt this is what the grandparents would have wanted.

Should this be written off as a case of bad luck, or was it a case of poor planning? There were two opportunities to create a different result that would have worked out better for the grandchildren. First, the grandparents could have established a trust for the daughter’s inheritance. Since they liked their son-in-law, the trust could have provided that the son-in-law would continue to receive income if he survived the daughter. Alternatively, the trust could have given the daughter the power to specify that her husband would receive all or part of the trust income following her death. The ultimate beneficiaries of the trust would be the grandchildren.
 

After the grandparents failed to establish a trust, their daughter could have established a trust for the primary benefit of her husband, with the remainder passing to her children. In either case, the principal of the trust would not have been available to pay for health care expenses of the second wife, and the grandchildren would have eventually received the principal of the trust.

Neither the grandparents nor the daughter anticipated that the son-in-law would get remarried and use the funds for the benefit of his second wife. Trusts should be used for significant inheritances to guard against unanticipated circumstances.