How do you plan to protect your child’s inheritance from a bad marriage?

[nancyfrank232]

Assuming no special/medical needs, when is the best time to look into setting up a trust?

Do you base it on your own age, the kids age, the assets involved, etc?

Is it possible that a trust be set up too early?

 

[OldShooter]

Assuming no special/medical needs, when is the best time to look into setting up a trust?

Do you base it on your own age, the kids age, the assets involved, etc?

Is it possible that a trust be set up too early?

Our trusts are "testamentary" trusts. The language of the trusts is all in our estate plan, but they do not really spring into existence until we die and assets from the estate are transferred to them per our wills.

As far as "when?" it is like computer backup. Just be sure to back up the night before the fire. Same-o, just be sure to do the trusts by the day before you die.

DW is really the expert on this, but here are a couple of cautions based on your question/IANAL though. Seek qualified help.

1) Asset step-up on death is a very big deal. If you bequeath appreciated property, like your house, your heir(s) have as its cost basis its value on your date of death. For this reason, the somewhat common practice of parents just giving the house to their kids is a huge no-no. The kids then have the parents' basis. Same-o for other assets like appreciated stock.

2) Some trusts disburse funds based on the beneficiary's age. For example, 25% of the value at age 25, 50% of the remainder at age 35, etc. Depending on other terms of the trust, this could tie the trustee's hands and prevent him/her from doing something you would want done. For example the trustee may not be able to disburse funds for home health care in the event of a debilitating or fatal disease. Again, seek qualified help.

 

[JustCurious]

Because that made the SIL the wage earner of the couple, and therefore much less likely to get an award for alimony or maintenance.

Under this scenario, at the time the divorce went through, he was the wage owner for several years making it more likely that the daughter may have gotten some temporary alimony, to allow her to get established in the work force, i.e. had she been out of work if there was a young child.

This is very clever indeed. Ironically I think the son in law probably thought that the father in law was putting him on the payroll to show how much he cared and that he was treating him as part of the family.

 

[HighOnLife]

A prenup would be best. Or just don't get married. Marriage is an obsolete concept anyway and the lifetime cost is astronomical.

Independent people don't fall for the trick.

+1

 

[HI Bill]

A prenup would be best. Or just don't get married. Marriage is an obsolete concept anyway and the lifetime cost is astronomical.

Independent people don't fall for the trick.

The level of trust, committment, and closeness went up significantly when I was married at age 47. When someone cohabitates, they can just up and leave at any time. Unless they're in certain states. Benefits of marriage also include certain potential tax benefits such as SS spousal benefits, and the MFJ rates. While there is certainly a potential for divorce and split assets, the benefits of a strong and loving marriage may far outweight those.

 

[HFWR]

I’m spending it all. Problem solved!

 

[wolf]

This article re-raises a point that I tried to make earlier in the thread: Using testamentary trusts is not just about marriages and divorces. Several here have commented on how wise, trustworthy, beautiful, etc. their children are. This can all be true, but their assets are still in peril due to circumstances completely beyond their control like a judgment due to an auto accident.

Well, maybe it would be a good idea to talk about it. Hopefully your estate plan contemplates that he may predecease you. That is more or less the same problem. Have you designated charities as beneficiaries then? Maybe you and he ought to talk about what charities you believe in.

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Switching gears, I submit the the "controlling from the grave" meme is distorting the dialog here. Certainly it is possible to draft a trust that does exactly that, but there are many situations where a better meme might be "protecting from the grave."

The simplest case might be a special needs trust for a person who cannot live on their own. A direct bequest might result in his/her not qualifying for government aid that they might otherwise get, where a properly written trust can provide money that is supplemental. Depending on the person's mental ability, a direct bequest might also result in a court-appointed conservator being given control of the money.

In our case, "protecting from the grave" means that our son will not receive a seven figure bequest that he has no idea how to manage. He would not be a spendthrift; we don't worry about that, but he is a very open and trusting soul who would be very susceptible to salespeople that he should not trust.

In the case of our grandchildren, "protecting from the grave" means encouraging them via financial carrots to go for as much education as they can while, at the same time, protecting them from the sort of natural spendthrift urges that come from being young.

Like your analysis. I'm in the same situation. Wife/I older, 70's. Young daughters. 20's. Nice but naive. Have substantial net worth. Seems the way to go is, Trust. Younger relative to manage Trust, with guidelines, and pre-nup agreement.

 

[OldShooter]

... Younger relative to manage Trust, with guidelines, and pre-nup agreement.

Be careful with this. Having someone in the family controlling money for someone else in the family has a high probability of destroying relationships.

Better maybe to have the relative be co-trustee with an (also younger) attorney. It can be the attorney who says "Sorry, DD, the trust money is not available for buying a Ferrari and, no, we will not start investing in bitcoin." My DW, whose troops administered many trusts at the megabank, ran into this kind of thing all the time and often pi$$ed off beneficiaries who had wild spending ideas. Some even went to court trying to break the trust. DW never lost a case but the trusts, of course, had to pay the legal costs of the attack.

 

[wolf]

I think my daughter would be grateful if I could figure out some way to safeguard her inheritance in case of a bad divorce, and not think of it as controlling from the grave.

Agree.