While we may love our children’s spouses, the truth is that when planning our estates, the majority of us don’t want our sons-in-law and daughters-in-law to inherit from us. This common sentiment combined with the unfortunate reality that a significant percentage of marriages in this country end up in divorce, means that everyone should engage in appropriate estate planning to protect their children’s inheritance from their spouse/future spouse.
In the event of a divorce, assets that your children inherit are considered separate property so long as those assets were never co-mingled with joint property or the individual property of a spouse. Doing so may inadvertently turn separate property into marital property and be subject to equitable distribution. While this seems like a straightforward concept, it is easy to imagine a couple using inherited assets to purchase a home that ends up jointly titled, or for your child’s spouse to gain an interest in an inherited piece of real property by contributing to maintenance and capital improvements of the property. Further, most people don’t intend to get divorced and while happily married, don’t always behave in a way that will protect their best interests in the event the relationship fails.
In order not to rely on the rules of separate property, there are estate planning strategies you can use during your lifetime to make sure that your child’s potential ex-spouse does not inherit your hard-earned wealth.
First and foremost, you should encourage your child to consider entering into a prenuptial agreement with their future spouse before they get married (or post nuptial agreement if they are already married). This is a contract between your child and their spouse that specifically identifies each party’s property and how that property will be divided in the event of divorce or death. The agreement can also stipulate that any appreciation to separate property is not subject to equitable distribution.
An action that you can personally take to protect your children in the event of divorce is to create a trust for the benefit of your child. This trust can be contained in your Last Will and Testament, or it can be created in a separate Living Trust. The trust can be structured so that your child has access to the income and principal to meet their basic needs as well as to provide for any extra comfort items they may desire. The trust can be structured as a discretionary trust, thereby allowing your trustee to have discretion in what, if anything, to give to your child, in order to protect your child from their spouse and/or creditors. This type of planning also allows you to control who will receive the remaining trust property after your child passes away, and this allows to you ensure that your grandchildren are the ultimate beneficiaries of your estate rather than your child’s spouse. Depending on how the trust is structured, your child can even be a co-trustee of their own trust. The important thing to note is that with the proper plan in place, the trust assets will not be accessible to your child’s spouse (or their creditors).
Call The Law Offices of Roman Aminov, P.C. at 347-766-2685 to speak to a knowledgeable estate planning attorney who can assist you in protecting your children’s inheritance.
This article is for educational purposes only - to provide you general information, not to provide specific legal advice. Use of this post does not create an attorney-client relationship and information contained herein should not be used as a substitute for competent legal advice from a licensed attorney in your state.
Call the Law Offices of Roman Aminov, P.C. to speak to a knowledgeable estate planning attorney about what type of trust is best for you and your family.
This article is for educational purposes only - to provide you general information, not to provide specific legal advice. Use of this post does not create an attorney-client relationship and information contained herein should not be used as a substitute for competent legal advice from a licensed local estate attorney in NY or your state.