How do I protect money gifted to kids if they divorce?

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Time2

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We got burned when we funded a SIL's IRA contributions and my daughter divorced him. It wasn't a lot, but it left a sour taste.
I want to even things up with my son as we have paid for my daughter to go to Dental school, $270k to $290k before she is done. He's still single, I'm comfortable he won't spend it, he is working, investing and funding Roth's, so doing well already.

Is there a way to protect any money we gift him from a spouse if he should divorce? Would it be best to get a prenuptial for any money going into the marriage? What about protecting gifted money after the marriage.
 
We look at a gift to our kids as just that - a gift. No I strings attached. We always give the gift to our son or daughter and its up to them how to use it or protect it.
 
I certainly think that it would be a mistake to force your son to have a prenup. That decision would be his and his potential spouse's to make.
 
I think it is a fair question... the gift is intended for their son... and not 50/50 for their son and a potential future spouse (who they may or may not like).

I think you could put it in a trust an make him the sole beneficiary.

https://www.barrons.com/articles/why-some-trusts-crumble-and-some-endure-during-divorce-1458967051

Or you could keep it an put it aside in an account that he is the sole beneficiary of when you pass, but if you pass while he is married then I think those would become marital assets and defeat the purpose.
 
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You can’t. Even if you try, who’s to say your son doesn’t blow it on his new wife? What I would do is evaluate things as time goes on. Maybe he’ll need some education money too. Maybe money for a house. Then, if it’s not “even” allow for additional funds to be distributed to son at death. Still no guarantee, but you’ll get to have some control over it. Also, I think inheritance money can be separated in a marriage if is is never co-mingled. Though, there again, that’s up to your son.
 
pb4uski said:
... I think you could put it in a trust an make him the sole beneficiary. ...
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This. With language to protect the trust assets against outside claims and language specifying how and for what purpose he receives money. Of course once he actually has the money your control is gone.
 
This comes up often enough. The answer is nope, you can't control your money once it leaves your hands. Some states do protect inheritances (vs. marital property) but not gifts while you are alive.
 
Jerry1 said:
You can’t. Even if you try, who’s to say your son doesn’t blow it on his new wife? What I would do is evaluate things as time goes on. Maybe he’ll need some education money too. Maybe money for a house.
Click to expand...


He already has a chemistry degree, I don't think he has any plans for a masters. Yes, I expect he will buy a house at some point.

Then, if it’s not “even” allow for additional funds to be distributed to son at death. Still no guarantee, but you’ll get to have some control over it. Also, I think inheritance money can be separated in a marriage if is is never co-mingled. Though, there again, that’s up to your son.
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If things go well, my kids could be in their late 50s before any inheritance. So It would be nice to distribute some be fore then.
 
Here's another alternative which combines elements of some of the previous thoughts.

Instead of just giving him all the funds now, take the lump sum and invest it in some type of growth+income fund/ETF. List your son as the sole beneficiary. Every year, as it throws off income distributions, give it to your son as a gift. When you eventually pass away, the fund (which will likely have increased in value) will then pass to him.

In this way, you'll be giving him something every year. You can be assured he won't blow it all at one time, possibly on something frivolous. Lastly, when you do pass away (many years from now), hopefully he'll still be married to the same spouse and you wouldn't be as concerned about the prospect of a breakup.
 
JRon said:
We look at a gift to our kids as just that - a gift. No I strings attached. We always give the gift to our son or daughter and its up to them how to use it or protect it.
Click to expand...

Same here.

OP--if you helped your DD with money for dental school, doesn't a potential spouse benefit from that due to higher income on her part?
Anything that makes your sons life a bit easier/nicer will also benefit any future family he has.
 
In my state gifts and inheritances which are never commingled are the separate property of the individual and not subject to division in a divorce. Nothing fancy is required, just keep it in a separate account. Some other states have similar rules, but I don't know which ones do and which one's don't.
 
You cannot. Educate your kids and treat them like the adult they need to be.

Good Luck!
 
SecondCor521 said:
In my state gifts and inheritances which are never commingled are the separate property of the individual and not subject to division in a divorce. Nothing fancy is required, just keep it in a separate account. Some other states have similar rules, but I don't know which ones do and which one's don't.
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+1
I think this true I’m most states.
 
People mean well but giving large gifts to only one side of a marriage will affect the "balance of power" in a marriage. Tread carefully. I'd hate to be even potentially responsible for a marriage breaking up.
 
Time2 said:
We got burned when we funded a SIL's IRA contributions and my daughter divorced him. It wasn't a lot, but it left a sour taste.
I want to even things up with my son as we have paid for my daughter to go to Dental school, $270k to $290k before she is done. He's still single, I'm comfortable he won't spend it, he is working, investing and funding Roth's, so doing well already.

Is there a way to protect any money we gift him from a spouse if he should divorce? Would it be best to get a prenuptial for any money going into the marriage? What about protecting gifted money after the marriage.
Click to expand...

I don’t blame you one bit. Best you can do short of establishing a trust is to educate him. Typically money that is never commingled is not considered marital assets. Make sure he always keeps it separate from future marital funds. It should stay protected that way.

Premarital Property
The property that a person brought into the marriage is usually off-limits to the other spouse. However, this can change if the old property has comingled with marital property. For example, a bank account can become comingled property if the other spouse was added to the account or funds were used from the account that make transactions indistinguishable between separate transactions and marital transactions.

Additionally, premarital property that increased in value due to the contributions of the other spouse may provide the basis for an award to the other spouse. States vary on how they treat this issue.

Gifts and Inheritances
Most states recognize that property that is acquired by an individual as a personal gift or inheritance is separate property not subject to division. However, most state laws mandate that the spouse who wants to treat property as separate property has the burden of proof of proving such. For example, the spouse may be required to show a will or deed in which the property was given only to him or her and not to the spouses as a couple.
 
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You cannot and should not give a gift and try to control how the gift is used after it is given, and you definitely should not try to force your adult child to get a prenup, I think that would be very inappropriate.

I think you have to choose between (1) giving a gift and accepting that once given you have no control, or (2) designating funds to pass once you are gone. If you choose the latter option, you don't need a trust, you can set up an account with your adult child as the sole beneficiary and make sure they know about the existence and location of the account so they can claim it upon your passing.
 
Ginny said:
You cannot. Educate your kids and treat them like the adult they need to be.

Good Luck!
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My daughter is extremely bright, graduated HS and college early. That didn't stop her husband from having a girlfriend. She divorced him.
I can't educate the spouse.
Anyway, I knew I would get blowback, a gift is a gift, you can't control it,

treat them like adults, etc. That wasn't the point.
 
Time2 said:
My daughter is extremely bright, graduated HS and college early. That didn't stop her husband from having a girlfriend. She divorced him.
I can't educate the spouse.
Anyway, I knew I would get blowback, a gift is a gift, you can't control it,

treat them like adults, etc. That wasn't the point.
Click to expand...

Exactly. You want to protect them. I understand completely. I feel the same way. I have found the only thing you can really do is educate them on how to protect themselves. Not commingling is key. Unfortunately there are still no guarantees, short of establishing a trust.

A future unscrupulous spouse could still come along and convince your son to spend his gifted assets on marital property and on which they could eventually make a claim. That would be a decision your son would have to make in the future.

In my case I have one who can be trusted completely as demonstrated by past behavior. The same cannot be said of their same aged sibling. It’s frustrating wanting to give equally when one is ready and the other is not.

I’m interested in investing in their future, not flushing money down the toilet. I can seriously see my son years down the road wishing I’d kept the money so he could inherit it and have something one day than to have been given it to him early only to waste or mismanage it and end up with nothing.

Or creating a scenario where the thought is, “I wish my Mom hadn’t given me an early inheritance so my spouse could get half in a divorce. If only she had kept it and given it to me later.”

It’s not about controlling as much as it is about protecting. They have to be ready to handle what they’re given or it’s just a wasted effort.
 
Time2 said:
My daughter is extremely bright, graduated HS and college early. That didn't stop her husband from having a girlfriend. She divorced him.
I can't educate the spouse.
Anyway, I knew I would get blowback, a gift is a gift, you can't control it,

treat them like adults, etc. That wasn't the point.
Click to expand...


That wasn't the point of your question? Maybe not but it's the truth...you call it blowback, I call it a fact.



There are a lot of pitfalls in life, financial and otherwise...
 
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