On Monday we talked about the importance of discussing prenups with your adult children as they prepare for a wedding, especially for high-asset families. Prenups are not always the most comfortable thing to bring up with a fiancÃ©e, but they are very important tools for protecting one’s property in case of divorce. But parents with high-assets who wish to ensure that their estates transfers to the desired party (in this case, an adult child) without any hang-ups related to divorce or the lack of a prenup can rely on another tool to preserve their estates: creating a trust.
Benefits Of A Trust To Protect Inheritance In Divorce
A trust gives you much more control over your adult child’s inheritance. You decide the terms of the trust and can order the trustee to only pay out to your son or daughter in certain circumstances. Here are just a few terms you can throw into a trust to ensure that the assets go where you desire:
- You can name a trustee other than your adult child. This makes it so that a future ex-spouse of your adult child has no claim whatsoever over the assets. You can then declare that the trustee only distribute funds to the beneficiary in a separate account that is strictly used for their inheritance and to monitor all transactions the account is used for; this helps prevent commingling of assets in joint accounts held by your adult child and their spouse (commingling can give the spouse a claim, as joint assets are generally considered marital property)
- You can tell the trustee that assets are for specific uses in the future, such as your grandchildren’s educations or other expenses.
- You can tell the trustee that assets are not to be distributed to your adult child without the existence of a comprehensive prenuptial agreement or postnuptial agreement that ensures that assets remain with your adult child and not their spouse.
- You can even declare that certain assets are not to be distributed contingent upon expectations that you set forth.
If you do decide to create a trust, you must make sure that the terms of the trust leave no room for loopholes or leeway. An estate attorney can help you do just that.