Protecting Your Assets from Unintended Beneficiaries
It’s a common, and quite unfortunate, scenario – your child gets married and all seems well. The spouse becomes part of the family. Then, that seven-letter word starts to be bantered about – “divorce”. Suddenly, questions arise as to whether your now ex-son-or-daughter-in-law is entitled to any assets of your estate plan.
A simple strategy to avoid this scenario is to set up a revocable living trust. One of the most attractive features of trusts is that they can be shaped to serve a variety of different circumstances and achieve different objectives. In fact, trusts are routinely utilized for gifting, asset management, tax protection, and as a shield against creditors and/or civil lawsuits. Trusts can be established while you are living, or they can be included in a will with a stipulation that the trust is to be established after your passing.
How do trusts protect you and your family members from unintended beneficiaries? Well, assets in a trust established before marriage are typically treated as separate property, according to Forbes.com. This means if you have assets in a trust that are designated to your child before they get married, their spouse will not be entitled to a share of those assets if they subsequently get divorced. However, it is important their trust is setup with the right provisions to ensure their spouse would not be entitled to those assets in the event the child passes away.
Another benefit is that, in some states, assets placed in a trust are not considered “belonging” to the beneficiary for the purpose of calculating alimony. But always remember, laws vary state-to-state so sit down and speak to an estate planning attorney to see what laws apply in your jurisdiction. For example, Virginia offers some level of asset protection through a Domestic Asset Protection Trust. However, claims for child support can pierce through and access trust assets (see Va. Code § 55-454.03:03).
To learn more about how to protect your assets from unintended beneficiaries, take the time to meet with an experienced estate planning attorney in your area.