The “I love you” will is NOT a good way to leave assets to your spouse. An “I love you” will is as simple will that provides all assets to go directly to the spouse. If the spouse is not then living, the assets go to the children.
Why you shouldn’t leave your assets to your spouse:
- Outright assets often never reach children. Children are often unintentionally disinherited by their parent and intentionally disinherited by a step-parent. Instead, pass the assets to your surviving spouse in a trust.
- Outright assets have no asset protection. They can be taken by your spouse’s creditors or predators. In other words, the assets can be seized in a subsequent divorce, bankruptcy or other creditor action such as a malpractice suit, car accident, slip and fall, or business failure. Predators are charities, ministers, financial advisors, and others who prey on widows (and widowers.)
- Windfall assets are typically gone in 18 months. When a spendthrift beneficiary, spouse or otherwise, suddenly inherits a windfall, the assets are spent and there is nothing left to support the spouse or to be inherited by the children.
- An outright inheritance may disqualify a special needs spouse from receiving governmental assistance. For instance, if your spouse is receiving Medicaid payments to pay for nursing home care, an outright inheritance will disqualify her. On the other hand, if the inheritance is in trust with special needs provisions, your assets can be used to make her life better, supplementing, not supplanting what the government pays for. Thus, your hard earned assets aren’t wasted.
- Outright inheritances to a spouse do not use your lifetime exemption and may lead to great tax liability. (We’re ignoring portability at the moment due to its limited applicable time frame, vagueness, newness, and requirements.)
Pass your assets in a trust to avoid all 5 of these outright inheritance issues. Your spouse can be the beneficiary of your trust and use the assets for her needs, health, education, and maintenance.