Report: What Are the Benefits of Bloodline Trusts

By:  Thomas D. Begley, Jr., Esquire, CELA



Bill and Linda have a daughter, Sally, who marries Harry. While Harry is attractive and likeable, he has difficulty holding a job, and he is a poor money manager. Harry also likes to spend money lavishly, mostly on himself, rather than on Sally and the children.

Sally’s parents die, and their estate is left to her. After several years of marriage, Sally and Harry divorce. Under the rules of equitable distribution, Harry receives half of Sally’s inheritance. Harry moves to another state and refuses to pay any child support for Bill and Linda’s grandchildren.

If Sally’s inheritance had been placed in a Bloodline Trust, it would have been protected from Harry’s claim for equitable distribution.

Bob and Brenda have a daughter, Susanne, who is involved in an automobile accident. Susanne causes the passenger in the vehicle she hits to become a quadriplegic. The injured person sues and recovers a judgment against Susanne for $6,000,000. Susanne’s entire inheritance is used to pay toward the judgment.

If Susanne’s inheritance had been placed in a Bloodline Trust, it would have been protected from the claims of her creditors including the personal injury victim.





John and Jenny have a daughter, Joan. John and Jenny die and leave their estate to Joan. A few years later Joan dies leaving her estate to her husband, Dan. Two years later Dan remarries. Dan’s new wife’s name is Olivia.

Three years later Dan dies unexpectedly leaving everything, including Joan’s inheritance, to Olivia. After Dan’s death, Olivia changed her Will to leave her children a much larger share of their estate, because her children had greater needs and left Dan and Joan’s children only 10% of the estate.

When Should You Consider a Bloodline Trust?

A Bloodline Trust offers protection to your children 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, your son or daughter-in-law may wind up with 50% of your child’s inheritance. If you want to protect your 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 your 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 your child’s previous marriage.
  • Creditor

    If you leave your estate to your child and the child is later sued, the child’s creditors can attach the inheritance. The creditor may wind up with 100% of your 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 you leave to your child is then diverted to paying for the long-term care of the parents of your son or daughter-in-law.  If the money is held in a bloodline trust, this becomes more difficult.

  • Protecting Your 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 your child’s inheritance at risk.

Potential Issues Include:

  • The inheritance can be squandered by your son- or daughter-in-law.
  • If the inheritance is commingled with the assets of your son- or daughter-in-law during the marriage, it will be subject to equitable distribution during divorce proceedings.
  • Grandchildren from your child’s first marriage could be disinherited by a son- or daughter-in-law from a second marriage.

  • Your grandchildren could effectively be disinherited if your son- or daughter-in-law receives part of the inheritance and squanders it through misuse or poor money management.
  • If your child is the subject of a lawsuit, the inheritance that you leave him or her is not protected unless it is in a Bloodline Trust.

Your 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 your child dies before the money is all spent, you may want it to remain in trust for your 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.

Second, if you are concerned about your 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 your irresponsible child is constantly asking for money and your responsible child 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.

Third, if the concern is payment for long-term care of the parents of your son or daughter-in-law, the selection of trustee becomes more murky. Perhaps consideration could be given to appointing your child and his or her sibling as co-trustees in that situation.


There are three options with respect to the trustee of the bloodline trust. First, if there is a responsible child and the concern is to protect the money from creditors, divorce, or death of your child, then the child could be sole trustee and be given total charge with respect to distributions from the trust.