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Lombard estate planning attorneyChoosing a beneficiary for your will, trust, or life insurance policy might at first seem like a relatively simple task. For some, a specific person automatically comes to mind--someone they know, care for, and trust--and the decision is made. For others, though, the task can feel tedious. Depending on your financial circumstances, designating someone as beneficiary can place a significant amount of responsibility on the inheritor.

A Multi-Faceted Inheritance

Notice the word inheritor. Typically, the beneficiary of a will, trust, or life insurance policy is set to inherit something to their advantage. They receive benefits, profits, or funds from a particular account or policy, designated to them by whatever estate planning tool you choose to utilize. While this can certainly be a positive turn of events for the inheritor in the midst of your passing, it can still mean a lot of responsibility, as receiving funds can also mean receiving a burdensome responsibility.

Sadly, tense arguments and disagreements can arise between families and loved ones when a certain friend or family member inherits money. Decisions must be made by the recipient regarding any property, possessions, or monetary funds inherited, which can be emotionally and mentally taxing for anyone involved. While you cannot predict or control how everyone will interpret and respond to your choice of inheritor, you do have a say in who you would like to assign these responsibilities to, should you document your wishes well in advance.

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inheritance, prenuptial agreement, Illinois Family Law AttorneyWhile many may view prenuptial agreements as necessary only for the rich and famous who stand to lose millions in divorce, the reality is much different. In fact, many marriage and financial experts recommend such agreements for all couples, especially those entering a second or subsequent marriage. In addition to outlining what is to happen with marital property in the event of death or divorce, can also be used to identify your own personal assets prior to marriage and establish a plan for their disposition as well.

Heirlooms and Inheritances

Consider a fairly specific, but not terribly uncommon scenario: For several generations, your family has passed down an item of both physical and sentimental value to the oldest child. This item previously belonged to your father, to his mother before him, and to her father before her. You inherited the asset prior to your marriage and long before you ever had children. Since the heirloom is an inheritance, and since it was acquired before marriage, it is not considered marital property by law. However, a prenuptial agreement can help you solidify the item’s status as personal property, retaining your ability to pass it down to your oldest child regardless of the state of your marriage.

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inheritance in divorceFor the majority of people who get married, the assumption is that it will be "’til death do us part." Despite the high rate of divorce, most couples think they will beat the odds and live happily ever after. Typically, all the assets a couple acquires during the marriage are pooled – income, gifts, inheritances, etc. are all shared between the two spouses. The reality is, however, that at least half of marriages do end in divorce, with an even higher rate if the marriage is a second or third marriage.

Most divorce negotiations involve how finances and property will be divided between the couple, but what happens with the inherited assets? Unfortunately, in many circumstances, unless there was an agreement in place before the divorce, those assets just may be included in the marital estate. A person may be able to keep that expensive piece of jewelry their grandmother left them, but the value of that piece becomes part of the marital estate and the other spouse is entitled to receive something of equal value in their share of the marital estate. The same may be true for inherited real estate property, stocks and bonds, and cash.

There are ways a person can protect those inherited assets in the event their marriage does not work out. The first step is a prenuptial agreement. Engaged couples should consider prenuptial agreements for many reasons, and this certainly is an important one. A prenup can clearly outline that in the event of a divorce, inherited assets go to the spouse they were intended for and not considered part of the marital estate.

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