Estate planning often requires people to think far into a future they can’t predict as they determine how their assets will be divided among loved ones. For many, that means considering in-laws that aren’t even in the picture yet – or maybe they are, and that’s the problem.
If you have a child who makes perpetually poor choices when it comes to romantic partners or spouses, you have a right to be concerned that your hard-earned money or assets passed down to you through generations will end up in the hands of someone you don’t like or trust.
Maybe you’re crazy about your new son- or daughter-in-law. However, if the marriage ends, do you want them walking away with a substantial portion of what you intended your child to have?
These are very natural concerns. That’s why there are estate planning tools to help you protect your family’s wealth.
Establishing a trust
A commonly used estate planning tool to keep money in the family is a trust. You can set up a trust solely in your child’s name, with a trustee charged with overseeing it.
Whether it’s a trust fund that your child can access while you’re still alive or a trust that’s funded only when you pass away, you can set it up so that it’s not considered marital property and cannot be claimed by your child’s spouse in a divorce.
A trust’s protection can be wiped away by commingling
A trust can help you fulfill your goals for your child’s inheritance. However, they have to do their part as well. All of this careful planning can be undone if your child commingles these funds with marital assets. Then the trust can potentially be considered a marital asset subject to division in a divorce.
People often commingle assets without realizing it. All your child has to do is put some of the money into purchasing the couple’s new home or buying stock in a jointly owned investment account.
That’s why it’s wise to make sure your child or other loved one understands how to protect the assets you’re leaving them before you finalize your estate plans. You may even have them sit down with one of your legal or financial advisors to get a better understanding of how to protect the wealth with which you’re entrusting them.