We hear these type of questions all of the time: “How can I keep my son-in-law from getting his hands on my daughter’s inheritance?” It’s a good question since we never know when the in-law will become the outlaw, so to speak. Protecting your child’s inheritance is an important part of estate planning and it can be done. After all, 50% of all first marriages end in divorce while 60% of all second marriages end in divorce.
Here are some asset protection points to consider. Be sure to consult with a qualified estate planning attorney regarding your individual situation.
- If you give your daughter her inheritance outright, it can be taken by creditors and her divorcing spouse.
- If you give your daughter her inheritance in an individual trust share, with protective language, it CANNOT be taken by creditors and a divorcing spouse.
- Talk with your daughter and explain that it is imperative that she keep her inheritance in the trust. If she pulls assets out of the trust and commingles them with marital assets, they become marital assets and can be taken by her husband. For example, if your daughter wants to open an investment account or buy a house, she should do so in the name of her trust, not in her individual name.
- Either name an independent trustee (bank, trust company, or professional advisor) as the trustee of your daughter’s trust or name your daughter as a co-trustee with another trustee. For flexibility, you can allow your daughter to choose the co-trustee.
- If you’re interested in passing assets to your daughter while you’re still alive, you can do so. Just do it in a trust, to provide asset protection.
Make a list of your estate planning questions and consult a qualified estate planning attorney. Be sure to chat about asset protection to protect your child’s inheritance as it is important for everyone.