Whether you fear that your child has married someone unreliable or you have faced the reality that around half of all marriages end in divorce, there can be a number of reasons why you would worry about leaving an inheritance to your child that would end up in the hands of a spouse who winds up as a former spouse. During divorce proceedings, all marital property will be subject to division. The court will first determine what constitutes marital property and what is separate property.
Generally speaking, marital property is any property acquired by you or your spouse during the course of your marriage, with some exceptions. Separate property generally includes property acquired by you or your spouse before marriage or property you acquired during the marriage by devise or gift. This means that inheritance is presumed to be separate property even if it was acquired during the marriage. However, an inheritance can become marital property all too easily.
If the inheritance was co-mingled with jointly held funds or jointly held property, it may become part of the marital estate and would, therefore, be subject to division during divorce. You may have deposited the inheritance in a joint financial account. You may have alternatively used the inheritance to purchase jointly held real property. In either event, a court would likely consider the inheritance a gift to the marriage and, thus it would not be considered separate property.
Comingling of inheritance can happen all too easily and under a number of circumstances. If this happens, the inheritance you left to provide for your child will end up in the hands of their spouse during divorce proceedings. If you have concerns about this potential situation, there are steps you can take during the estate planning process to help prevent this from happening.
How Can You Protect an Heir’s Inheritance from His or Her Spouse?
Establishing a trust is one of the best ways to protect your child’s inheritance from his or her spouse. Funds placed in the trust also have the opportunity to increase in value through proper investment choices. Place your child’s inheritance in the trust. This means, legally speaking, the trust owns the property. Limit your child’s access and control over the trust property and condition distributions as you see fit.
You could even establish in the trust document that trust distributions are to be kept in a separate bank account that is held only in your child’s name. Something like this would prevent co-mingling of funds that could come with depositing trust distributions in a jointly held bank account. You could also place conditions on how trust distributions are to be used. There are many protective measures you could put in place when you establish the trust that could effectively prevent your child’s spouse from ever having any part of the inheritance.
Estate Planning Protection for Families
It is difficult to think about our children growing up and falling into marriages that just do not work out. However, it is a reality for so many families. If you wish to protect your child’s inheritance from what will become a former spouse, you can do so during the estate planning process. Monk Law will walk you through your options and discuss with you the best ways to protect your child’s future inheritance rights. Contact us today.