Will My Child’s Divorce Affect My Estate Plan?
Would you prefer that your child’s inheritance stay with your child and not go to a divorcing spouse? It may surprise you to know that when your estate plan gives an inheritance directly to your child, he or she is likely to lose part or all of that inheritance during divorce. After all, 50% of our children do get divorced at least once.
However, you have the power to protect inheritances. If you tweak your estate plan just a little, your child’s inheritance can’t be taken during divorce. What’s that essential estate plan “tweak” which protects inheritances?
It’s a Trust
Trusts are commonly used to protect assets from divorcing spouses, bankruptcy creditors, and lawsuit creditors.
With the stroke of a pen, inheritances are protected.
Some parents worry that a trust will tie their children’s hands. A trust does indeed add a layer of complexity, so you need to judge whether a bit of complexity is worth protecting your child’s inheritance from a divorcing spouse and other creditors.
However, keep in mind that trust assets are available to your child, but they are NOT available to his or her creditors such as a divorcing spouse.
- Special language is included in a trust, instructing that assets are to be used for your child’s benefit and not to benefit his or her creditors.
- In addition, either an independent trustee or a co-trustee is named.
Trusts Protect Lifetime Gifts and Inheritances
We’ve been discussing using a trust to protect inheritances. Trusts can also be used to protect assets gifted to children during your lifetime. In both cases, assets are transferred to a trust to benefit your child, instead of to your child directly. Trustees are named to carry out your trust instructions and trust assets are used to benefit your child – not your child’s divorcing spouse.
Do You Need a Trust to Protect Your Child’s Inheritance: Your Next Step
If you want to keep your child’s inheritance safe from a divorcing spouse, we invite you to call and schedule an estate planning consultation now by calling at 856-857-6007 or by emailing our client relations manager at firstname.lastname@example.org . We’ll help you determine whether a trust is appropriate for your family and, if so, show you how to craft your estate plan to protect against your child’s divorcing spouse.