How to Protect Your Child’s Inheritance from Divorce Jun 5, 2017 Most parents’ purpose in creating an estate plan is to provide for their children. Many parents want to make sure that their wealth, which they worked so hard to earn and accumulate, is not wasted or lost. Some parents particularly want to protect their children’s inheritance from the possibility of divorce. Fortunately, there are several estate planning options to achieve this goal. Create a Trust Creating a trust allows you to control how your property is distributed over time. One decision that you have to make when you create a trust is name the trustee. The trustee is the person who will administer the trust after you are gone. If you have particular concerns about an in-law, you should name a trustee independent of your children to eliminate all possible questions about the access your child has to the trust. Your goal is to decrease your child’s control or influence over the trust while still protecting on some level the benefit the child derives from the trust. Another big decision with a trust is how the trust property is to be distributed out. You can skip your child altogether and make the child’s children the trust beneficiaries. You can also create a discretionary lifetime trust. This is a normal trust but the name describes the distribution pattern. By giving the trustee full discretion, your child beneficiary has little to no right to trust property, and the trust property can be protected from commingling. This again helps protect the trust from the possibility of divorce. Use Prenuptial Agreements In Colorado, prenuptial and postnuptial agreements are called Marital Agreements. You children should sign these agreements in which the in-law disclaims all claims or rights to trust property. In the event of divorce, the Marital Agreement is legally enforceable and prevents the divorcing in-law from laying claim on trust property. Incorporating a pre-nuptial agreement is an important, and arguably essential, part of protecting your trust assets. Other Planning Ideas Estate planning is not just about legal documents. You may also want to think about having a family meeting to discuss your goals, concerns, reasons, and what you have actually done in creating your estate plan. You should also work to make your estate planning documents’ language and directive are clear regarding your intentions. Again, because you cannot foresee everything, having a trustee who is independent of your children is very important. Bottom Line: Seek Out Estate Planning Help to Protect Against Divorce An estate plan is a highly complex and detailed strategy, and it is very easy to make mistakes without professional help. If you do not have an estate plan, or if your estate plan is more than a few years old, you should identify an estate planning attorney you can trust and work well with to develop a plan that fulfills your wishes.
