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

[nancyfrank232]

Once money or assets are given to a child, and the child gets married, any separation or divorce may give your child’s spouse a nice windfall

For those who will have significant wealth to pass down to their children, how do you plan to protect it?

Do you accept that if you buy your child and their spouse a home or give them a large sum of cash, that upon divorce, the spouse will get half of it?

Do you just give without worrying about it? And whatever happens, happens?

Do you leave it in your will, and whatever happens after you die is no longer your problem?

Do you create a trust?

[bingybear]

look at a heredity or bloodline trust. It is difficult to control from the grave... so be careful what you set up. Be careful that trust taxes doesn't eat your trust assets if you try to withhold gains from the beneficiaries.

I think once you give it to the beneficiary... it is out of your control.

[Pete10k]

Here’s my take on it:

Around age 25, when your ds/dd is earning their own way you sit them down and have a discussion about do’s and don’ts on broad topics such as stepped up basis, Inherited IRA RMD’s, taxes, etc. nothing specific to inheritance amounts. As a matter of fact I’m a firm believer that it’s best if they don’t know specifics on the amounts until you’re closer to kicking the bucket and they are in their 50’s(assuming that makes you around 75-80). That leaves plenty of time for them to make their own way and fully appreciate all your hard work and planning vs expecting a windfall and not reaching their own potential.

It also will enable you to start to get the help you’ll need from them getting around when you need it most. Read: they are now ‘fully vested in helping you.’ get it?

Once they get married you have another talk about how they’re planning their own affairs and importance of wills/trust to protect their own family. at this point you might direct them to the attorney who set yours up so they can get their own affairs in order.

Once you’re in your 70’s (again assuming you aren’t deathly ill and you expect to live into your 80’s or 90’s) you could take them (by themself not with spouse) down to meet your attorney and discuss your specific affairs and the estate attorney should then counsel them on how trust and Inherited IRA funds flow from their parents into their own newly created individual trusts (upon your death) how to protect generational assets by not commingling, etc.

May you live a long, happy and healthy life. Good luck!

[euro]

Quote:

Originally Posted by nancyfrank232 Once money or assets are given to a child, and the child gets married, any separation or divorce may give your child’s spouse a nice windfall For those who will have significant wealth to pass down to their children, how do you plan to protect it? Do you accept that if you buy your child and their spouse a home or give them a large sum of cash, that upon divorce, the spouse will get half of it? Do you just give without worrying about it? And whatever happens, happens? Do you leave it in your will, and whatever happens after you die is no longer your problem? Do you create a trust?

I will let the chips fall as they may. As long as my DW is taken care of, it doesn’t matter to me. My DD just got married and I gifted/sold one of my rental properties to her. If she gets divorced, half of it will go to her husband. C’est la vie!

[Gill]

The only effective approach is the use of a trust. My estate plan has a combination of an outright distribution and the balance in a very flexible trust for my only child.
Gill

[marko]

This is one of the reasons trusts exist.
And pre-nups.

[gwraigty]

Quote:

Originally Posted by Pete10k It also will enable you to start to get the help you’ll need from them getting around when you need it most. Read: they are now ‘fully vested in helping you.’ get it?

Manipulation 101.

Quote:

Originally Posted by euro I will let the chips fall as they may. As long as my DW is taken care of, it doesn’t matter to me. My DD just got married and I gifted/sold one of my rental properties to her. If she gets divorced, half of it will go to her husband. C’est la vie!

+1

[Mdlerth]

Ironically, I've been pondering the opposite question: What about recognizing the children-in-law in the disposition of my worldly goods?

The last time we wrote wills predates any of our children's marriages, and they're past due for revision. Both my DDIL and DSIL are fabulous, and I think the world of them. They are family now, so why shouldn't I consider them co-heirs with my blood children?

That prompts the question of whether they would cease to be family in the case of the marriages foundering; a low but nonzero probability. I don't have any answers yet.

It isn't my most urgent concern, since I don't expect to leave a colossal fortune anyway. Whatever problems the estate causes won't be big ones. A few million divided by enough heirs doesn't amount to a huge windfall. But it is an interesting thought experiment.

[pj.mask]

I’d set up a trust on death with little restrictions. Once grandkids come same for them (less to married parents). Not just spouse but lawsuit protection.

[timbo]

I'm no expert on this but it seems like a trust would be the best way to deal with this. If it's are real concern you should talk to a lawyer about it.

[SecondCor521]

In my state (and possibly others), inherited assets, as long as they are not commingled, are considered separate property and not subject to a divorce proceeding.

My will and beneficiary designations basically divide things three ways between my three kids, who are all very smart in addition to being good looking.

I think they are well aware of the "partner gets half in a divorce" rule, since their mother and I are no longer married.

They will probably inherit enough to where they'll investigate or ask about it if it's a concern.

[ExFlyBoy5]

Quote:

Originally Posted by SecondCor521 In my state (and possibly others), inherited assets, as long as they are not commingled, are considered separate property and not subject to a divorce proceeding.

This.

Or, consider a trust.

Or, don't try and control your children from the grave. They are (or will soon be) adults, so let them be adults.

[OldShooter]

We have testamentary trusts, too. Divorce is only one of the many bad things that could befall your money. For example, our #1 son is excellent in most respects but he knows nothing about managing money. The language in his trust instructs the trustee (Schwab) to manage the money to support his retirement but gives the trustee broad authority to deal with unanticipated situations or emergencies. #1 has no children so on his death any money remaining goes to specific charities.

Left alone, #1 could easily be preyed upon by someone selling variable life or very expensive annuities. Some very nice person from his church, for example.

Another bad thing, absent a divorce, might be that your child and spouse die intestate in a common disaster leaving minor children. Now it may be someone you don't even know that ends up being charge of the money.

A well-written and well thought out trust can cover a lot of these eventualities. I don't view it as controlling from the grave in a negative sense. I view it as helping our heirs by establishing a money management framework that protects their inheritance.

[CRLLS]

We made no plans on "protecting" out DSs' inheritance against divorce. It is what it is. However, should one or all of our DS pass on before our demise, some amount will go directly to their spouse and some directly (or in trust) to the grandkids. In the event of a remarriage, we did not want our grandchildren to suffer due to poor choices of their mother. We expect that our DS's have made adult decisions as to their SO's and families. No need to interfere there.

Documents are not perfect and never reflect the true feelings we have for our DIL's.

[bingybear]

Quote:

Originally Posted by timbo I'm no expert on this but it seems like a trust would be the best way to deal with this. If it's are real concern you should talk to a lawyer about it.

I agree a trust can be a good way to handle it. The more difficult part is what you want the trust to do. You need to define it's function when you set it up because it is difficult to change after you pass.

So what does your trust do if your child becomes addicted to drugs? Does it fund the problem? Or does it fund the help they need?

The difficulty of controlling from the grave is knowing what is best for the beneficiaries after your gone.

One problem with waiting until your dead is the kids may not need the assets at that time. It might be better to pass some early.

[ncbill]

OP should read the book "Beyond the Grave" (second revised edition)

[candrew]

Quote:

Originally Posted by ExFlyBoy5 don't try and control your children from the grave. They are (or will soon be) adults, so let them be adults.

Our approach.

[Gumby]

I would just raise my kids to be the kind of people no one would want to marry in the first place. Problem solved.

[OldShooter]

Quote:

Originally Posted by bingybear ... So what does your trust do if your child becomes addicted to drugs? Does it fund the problem? Or does it fund the help they need? ...

As you imply, it is impossible for trust language to deal with every possibility. There is, however, a common catch-all called the HEMS standard (Health, Education, Maintenance, and Support). This sounds kind of sloppy, but there is a lot of history and case law. You can Google it and read until you fall asleep. To your specific question, under that HEMS standard I'm pretty sure that the trustee would not be be permitted to fund the problem but would be permitted to fund the recovery efforts. IANAL, however, so this is something for the grantor(s) to discuss with an experienced trusts & estates attorney.

Not yet said here, AFIK, but a professional trustee should be used wherever possible. Using a family member as a trustee is fraught with risks.

[SecondCor521]

I personally wouldn't do a trust.

At some point, someone has to make a decision to spend $X on thing Y. With direct giving, it's my kid. With a trust, it's some person who is presumably not my kid.

There is a chance in either case that the person who makes the decision makes a decision I don't (or wouldn't, if I'm dead) agree with. I'd rather that be my kid making that decision than someone else for multiple reasons.

First, I think they know better than anyone whether it's a good idea.

Second, I'll bet on my kids. They're smart, capable, and educated, not to mention good looking. Better looking than any trustee, that's for sure.

Third, if it's a mistake, I want it to be their responsibility so they have a chance to learn.