by: Begley Law Group

by Thomas D. Begley, Jr., CELA

What is a Bloodline Trust?

A Bloodline Trust is a trust for the benefit of children and/or grandchildren. Rather than leaving the monies outright to children or grandchildren, money is left in a Spendthrift Trust with no withdrawal rights. If the child or grandchild is reliable, they can be appointed trustee of their own trust under the provisions of the New Jersey Trust Code. If a lawsuit or divorce is filed against the child, that child is removed as trustee and a successor trustee replaces that child. Upon termination of the lawsuit or divorce, the child can be reinstated as trustee. If the child is not reliable, an independent trustee can be appointed.

When Should a Bloodline Trust be Considered?

A Bloodline Trust offers protection to children and/or grandchildren from: (1) divorce, (2) creditors, (3) death of children and subsequent remarriages of children’s spouses, (4) long-term care of children’s in-laws, and (5) squandering the money.


The old saying, “We can pick our friends, but we can’t pick our family,” is particularly applicable in the case of sons- and daughters-in-law. Often, our children choose wonderful, trustworthy spouses with whom we get along very well. But occasionally, they choose partners who cannot be trusted, leaving us concerned for the emotional and financial well-being of our children and grandchildren.

A child’s poor choice of spouse can translate into a parent’s estate planning headache, particularly when there is a divorce. With 50% of all marriages and 70% of second marriages ending in divorce,[1] this is not an uncommon dilemma. If there is a divorce, a son or daughter-in-law may wind up with 50% of the client’s child’s inheritance.

If the client wants to protect the child’s inheritance from an irresponsible spouse or ex-spouse, consider establishing a bloodline trust. A bloodline trust should always be considered when the son- or daughter-in-law:

  • Is a spendthrift and /or poor money manager.
  • Has difficulty holding a job.
  • Is a gambler.
  • Has an addictive illness such as alcoholism or drug addiction.
  • Is emotionally and /or physically abusive to the client’s child and /or grandchildren.
  • Has children from a previous marriage.
  • Is unfaithful.
  • Is not close to and /or not on good terms with children from the client’s child’s previous marriage.


If the client leaves his or her estate to a child and the child is later sued, the child’s creditors can attach the inheritance. The creditor may wind up with 100% of the client’s child’s inheritance. However, if the inheritance is left in a Bloodline Trust, it is protected from claims of creditors.

Death and Remarriage

If we leave an inheritance to our child, in all likelihood that child will name their spouse as primary beneficiary of their estate, which includes any inheritance from parents. If the child then dies, the spouse gets the inheritance that the child received from the parent. If the spouse remarries, he or she will most likely name his or her new spouse as primary beneficiary of the estate. Thus, the money that the parents intended to go to their children and grandchildren may well wind up in the hands of any in-law’s second spouse and his or her stepchildren. If the parents leave the money to the child in a Bloodline Trust and the child dies, the trust can provide that it pass on to the grandchildren either in a continuing Bloodline Trust or outright. The money stays in the bloodline.

Long-Term Care for Parents of Sons and Daughters-in Law

In many cases, a parent leaves money to a child. Subsequently, the parents of the son or daughter-in-law become sick and require expensive long-term care, perhaps even including nursing home care. They often don’t have the money to pay and call upon their children. The money the client leaves to the child is then diverted to paying for the long-term care of the parents of the son or daughter-in-law. If the money is held in a bloodline trust, this becomes more difficult.

Protecting Children from Squandering the Money

Some children are wonderful people, but not good money managers. The average inheritance lasts three to five years. If money is placed in a trust, the trust can be designed to provide for the child’s health, education, maintenance and support but oversight can be provided by an independent trustee to ensure that the money lasts and is not spent frivolously. Sometimes it’s the child who is a poor money manager. Frequently, it is the spouse of the child, the son or daughter-in-law, who is the poor money manager and persuades the child to spend the money foolishly.

What Problems Can Arise Without a Bloodline Trust?

Without a Bloodline Trust, a number of circumstances can put the client’s child’s inheritance at risk.

  • The inheritance can be squandered by the client’s son- or daughter-in-law.
  • If the inheritance is commingled with the assets of the client’s son- or daughter-in-law during the marriage, it will be subject to equitable distribution during divorce proceedings.
  • Grandchildren from the client’s child’s first marriage could be disinherited by a son- or daughter-in-law from a second marriage.
  • Grandchildren could effectively be disinherited if the client’s son- or daughter-in-law receives part of the inheritance and squanders it through misuse or poor money management.
  • If the client’s child is the subject of a lawsuit, the inheritance that the client’s leaves him or her is not protected unless it is in a Bloodline Trust.

Who Serves as Trustee of the Bloodline Trust?

There are three options with respect to the trustee of the bloodline trust.

  1. Responsible Child. First, if there is a responsible child and the concern is to protect the money from creditors, divorce, or death of the client’s child, then the child could be sole trustee and be given total charge with respect to distributions from the trust. The child, acting as trustee, can distribute principal and income to or for the benefit of himself or herself or to his or her children. A sibling or friend could be named as successor trustee. If the child is sued by a creditor or spouse for divorce, then the child is removed as trustee and the sibling is substituted as successor trustee. When the lawsuit is ended, the child is reinstated as trustee and the sibling is removed as trustee. If the child dies before the money is all spent, the testator may want it to remain in trust for grandchildren. At that time, divorce is no longer an issue, so the son or daughter-in-law could serve as trustee for their child’s share.
  2. Independent Trustee. Second, if the concern is about the child squandering the money, it is better to get an outside trustee. A sibling could serves as trustee, but they are put in a position where the client’s irresponsible child is constantly asking for money and the responsible sibling should be saying no. This causes strain in family relationships. A professional outside trustee is better in that situation. If a professional outside trustee is used, a sibling should be given the power to remove and replace that trustee if things don’t work out.
  3. Co-Trustees. Third, if the concern is payment for long-term care of the parents of the son or daughter-in-law, the selection of trustee becomes more murky. Perhaps consideration could be given to appointing the testator’s child and his or her sibling as co-trustees in that situation.

[1] Divorce Magazine, http://www.divorcemag.com/statistics/stats.US.html