Can I Protect My Child’s Inheritance During a Divorce?

familyYou and your spouse created an estate plan that leaves your child a sizeable inheritance. However, you both have decided that it is time to divorce. Now, you wonder what that means for your child’s future – especially their inheritance.

Luckily, inheritances are not treated like marital property; therefore, they are not divided equally per the family law statute. If, however, inheritances co-mingle, then they could be subject to distribution in a divorce.

Parents should take precautions to ensure their children’s inheritances are safe from their spouse, adult childrens’ spouses, and other third parties. After all, no one can predict the future – especially when it concerns marital outcomes.

For Nonmarital Children

Non-marital children would have inheritance rights if you were to die without an estate plan. However, they will go through probate court – where numerous disagreements can be unpleasant – in order to receive such inheritance. To ensure that children born before the marriage receive their appropriate inheritance, parents typically create an estate plan. This plan helps to ensure that there are no complications when it comes time to pass down a sizeable inheritance.

To ensure that a child born out of wedlock receives his or her share, parents should be very specific in their will. Parents should plainly and clearly state that they want their half of the marital assets, as well as all pre-marital assets, distributed to that child in accordance with the estate plan.

Protecting an Adult Child at Risk from Divorce

If you have left an inheritance to an adult child, and your adult child divorces, what happens then? Will the estate that you worked so hard to amass and then gift to your child, become marital property that is now subject to asset division with their spouse during a divorce?

Obviously, you would not want that to happen.  So to ensure that the inheritance stays with your child, you must be sure to execute your estate plan properly. This means that you must specify, in your estate plan, that the inheritance is intended for your child only (not their spouse or children). This verbiage makes all the difference, as it ensures that the court will recognize the inheritance as premarital – and not subject to asset distribution during a divorce.

Consider a Dynasty Lifetime Trust

Most parents will decide to give their children an inheritance benefit at a particular age or immediately upon their death. However, once your child receives his or her inheritance, the property now belongs to your child.  It no longer is part of your estate.

Therefore, the inheritance is subject to all assets of your child regarding creditors, divorce, and so forth. Instead of allowing a lump sum to go straight into your child’s possession, consider the lifetime dynasty trust option.

A dynasty trust establishes an asset protection barrier between your child’s inheritance and all creditors (including spouses during divorce). In this instance, the inheritance is left in your child’s lifetime trust.

If your child is not good managing their money, a lifetime dynasty trust is your best option as well. This protects your child from overspending, and protects the child from outside influences. You would use a trustee to oversee your child’s inheritance, manage the funds, and monitor distributions from the trust.

Protect Your Child’s Inheritance with an Estate Plan

To protect your child’s inheritance from themselves, creditors, or a spouse, you need an estate plan. Speak with an attorney at the Law Office of Andrew M. Lamkin, P.C. today to meet for a free consultation. Discuss your child’s inheritances and how you would like to protect them, and let our attorneys find the ideal solution based on your case.

Schedule a free consultation now at 516-605-0625 or request more information online.

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