Life Insurance proceeds, inheritance and Child Support

[nextwife]

What is the name of your state? His order is from NY, we live in WI

NY CS law says:

"(e) Where a parent is or may be entitled to receive non-recurring
payments from extraordinary sources not otherwise considered as income
pursuant to this section, including but not limited to:
(1) Life insurance policies;
(2) Discharges of indebtedness;
(3) Recovery of bad debts and delinquency amounts;
(4) Gifts and inheritances; and
(5) Lottery winnings,
the court, in accordance with paragraphs (c), (d) and (f) of this
subdivision may allocate a proportion of the same to child support, and
such amount shall be paid in a manner determined by the court."

If I die, I desire certain insurance and assets of mine to be utilized toward the care and support of our daughter. Evidentally, if DH inherits ANYTHING (even if he'd be using it excusively toward support of our child per my dying wishes) it can be used as income for CS purposes. I do not wish to leave it directly to our child. If a trust for her care is created, and he is trustee with full discretion, is trust income, to a child in his care, subject to CS? I couldn't find anything in the guidelines that addressed trust income into the household of a NCP. Am I correct that this would be child's income, and so not counted as income of NCP?

 

[lsut1ger]

bumping this up as I'm curious to....

Just my uneducated thought process here but I would imagine that you could set it up in some fashion to be solely the benefit of your daughter...

The statute says "Where a parent is or may be entitled to receive"...

Well in this case the "parent" isn't entitled to anything...the child is.

Similiar to a SS payment for a child whose parent is deceased. The person caring for the child collects and utilizes the payment, but it doesn't belong to that person.

 

[nextwife]

It seems NY CSE counts insurance and inheritance as income.

Thank you for bumping it up. It is an estate planning matter that is driven by concern about NY CS laws (which my estate planning atty. doesn't deal with), yet my estate planning attorney would be using WI probate law. Seems the laws of MY state of residence and my probate should drive where my assets go. And I intend them to go toward maintaining my home for my husband and daughter.

Anyway, seems that in order to reserve the entire estate so that my husband can utilize it for my daughter (and he at the same time, as he would be the only parent living and responsible for her care the remainder of her childhood), I must either have some provision to hold back distribution somehow until his last child is past age 21 (NY), or put it all into a trust to the benefit of our daughter. I just want to be certain that whatever income my assets generate will be used by our household and cannot be applied toward any increase in CS.

It SHOULD function as a replacement for my income, which is what life insurance is intended for. I did not pay life insurance all these years to have a portion of the proceeds go to his ex.

 

[VeronicaGia]

You may wish to post this on another board, such as estates, but it is my understanding that if you create a living trust, you can decide what state's laws to follow, and it doesn't necessarily have to be the state you live in. In other words, I'm a MI resident, but maybe I like KY's laws better regarding their trust/estate laws. I read in one of those "do it yourself" trust books that I can do a trust that specifically states that I am using KY's laws for the trust. Realize I would never do a "do it yourself" trust as after reading that book, I knew it was way over my head and could be done wrong very easily. I would definitely hire an attorney.

In your case, if you create a trust in WI using WI laws, that is the deciding factor. I'm sure there is a way to create a revocable living trust that becomes irrevocable upon your death where you can protect this money from his child support obligation. If it means hiring an expensive lawyer, do it.

Even if it means that someone else is the trustee, not your husband, which is another option. He will not have access to the money at all, it will be up to a third party. But leave him some life insurance too....

 

[nextwife]

Trust me, it is NOT my intention to disineherit my wonderful husband, only to provide any inheritance in a way that he (and kiddo) will recieve the benefit.

You are right, I need to invest in a savey trust attorney who will also be certain to research how NY CS laws impact what we need to do. This is an issue that is not truly CS and not truly estate planning, but a bit of both.

Wonder if I can designate a pay-out schedule on my life insurance that would result in most all going to him after his last kid is past 21?

Gosh, morbid subject. But life is full of surprises, and we have no guaranties.

 

[VeronicaGia]

You also need to look at your own state's probate laws for the following:

What must be paid first out of an estate (in MI, it's funeral expenses). Then see what is next, and so on.

See what a spouse can claim as untouchable (I'll look up the term in a minute). In MI a spouse has up to the first $150,000.00 of an estate, and I believe it does not include life insurance directly left to that spouse.

I'll get back to you on what it's called.

The hard thing is you live in another state from the one that controls the support order. You are likely better off following your owns state's laws to ensure protection. I do happen to like MI's probate laws and trust laws to a great extent.

Finally, you need to look up your states laws on "specific exclusions," meaning this: in MI, if a child is not mentioned in a will, a child will have every right of succession according to MI laws. If a child or anyone other relative is "specifically excluded" from inheriting, they are considered mentioned in the will, and the will usually takes precedence. Your husband needs a will, needs likely to specifically mention any children whether they will inherit or not.

 

[VeronicaGia]

It's called a family allowance, or "share of spouse."

Personally, I think you need to follow your own state's laws, since that is where any probate, estate, etc., will be handled. IAAL or some other person can tell me if I'm wrong, but to the best of my knowledge, if a child or a person acting in the interests of a child wants to sue an estate, the child or person acting in interest of the child would have to do that in the state that in which the deceased died. In other words, if your DH died, they'd have to come to WI and make a claim on his estate, but of course, you are the direct beneficiary on everything possible. But back to your subject, you definitely need a good estate/trust attorney to help you to ensure your child is well taken care of.

 

[nextwife]

Question: If what MY state's probate laws state is "untouchable" is different than what NYs CS laws state is untouchable, WHOSE laws prevail?

His assets are not the issue. If he dies, we don't have a CS issue with insurance proceeds to me,

" in MI, if a child is not mentioned in a will, a child will have every right of succession according to MI laws. If a child or anyone other relative is "specifically excluded" from inheriting, they are considered mentioned in the will, and the will usually takes precedence."

Do I have to specifically EXCLUDE his kids from my will, as I am a legal stranger to them? His assets and mine are very different due to his very gracious treatment of his ex in property division at divorce time. And yes, he has a will that specifically addresses each child. He let ex basically have 100% of all assets they had. I have premarital assets (including the house) that we agreed should not pass into his estate.

Oh, both his kids are over 18 (NY CS is to 21), so CS won't be an issue for that much longer. Our daughter is 6.