You’re able to leave a fair amount of money to your adult children. They’re mature, intelligent people, and you trust them to use it wisely. However, you’re not crazy about the idea that their spouses could have access to it. Even worse, you’re concerned that in a divorce, one of those spouses could walk away with a large chunk of money you left for your child.
Many parents deal with this dilemma through trusts. You can set up a trust for a child in such a way that the funds are accessible only to them and to help ensure that the assets in the trust can’t be divided in a divorce.
You can protect your child’s money from a spouse even before they get married
Sometimes, parents set up trusts like this before their children are even married. This makes it less personal than waiting until they find a mate or until you see their marriage go through a bumpy patch and then reworking your estate plan.
Of course, you can revise your estate plan at any time to make these changes. It’s typically recommended that you review your estate plan once a year or whenever there’s a change in your family that may warrant a revision. However, it’s all too easy to tell yourself you’ll get around to the necessary changes but never do it. Your intentions to change your estate plan don’t count if you pass away before you make them.
A trust may not prevent the commingling of assets
Placing a child’s inheritance in a trust is an important step in protecting it if they divorce. However, they also have to know how to keep the assets completely separate from their spouse’s assets or any marital assets.
For example, if your child uses part of that inheritance to buy a home that is in both their and their spouse’s name, those assets are now commingled and can be subject to division in divorce. Even if they buy a house and put it in their name only, if the mortgage payments or money for renovations come out of a joint checking account, the spouse can likely successfully argue for a piece of it if the marriage ends.
Estate planning is largely about directing what happens to your property and other assets when you’re gone. Everyone’s family, goals and concerns are unique. That’s why it’s wise to have experienced legal guidance to help ensure that your plan achieves your goals.