Creating a trust that cannot be claimed in divorce

On Behalf of | Mar 29, 2024 | Estate Planning

Using a trust to convey your money and property to your adult child may give you peace of mind. It is true that a trust offers many protections for an inheritance. Still, your trust may become a contested object if your child gets a divorce.

It is possible that the spouse of your child could go after the trust as a divisible asset in a divorce. If you suspect your child might suffer a marital breakup, structuring your trust accordingly could keep the assets out of the hands of your child’s ex.

Pay on behalf of your child

It can be a significant factor if your child receives the trust money directly or not. If your son or daughter has the money in hand, the spouse might try to claim part of it. As an alternative, your trustee could pay for products or services for your child using the trust money, bypassing your child entirely.

By specifying that the trust conducts transactions on behalf of your child, the payments get made without the other spouse having a chance to get the money. Instead, your child will receive whatever good or service the trust has paid for.

Create an irrevocable trust

Another possible question in a divorce is whether your child owns the trust money. Even if your child is not the trustee, the trust could come under scrutiny from a divorce judge if the trust is revocable in nature. Making your trust irrevocable may help create more separation between your child and the trust since your child has no power to modify or abolish the trust.

Enhance the powers of the trustee

It is the job of your trustee to follow the terms you establish in the trust documents. This can include providing your trustee authority to act if your child gets a divorce.

To distance your child from the trust, you could instruct your trustee to remove your child as a beneficiary if a divorce is looming. Further instructions may include having your trustee compose a new trust for your child and shift existing trust assets into it.

It is important to consider many different life possibilities for your child as you make your estate plans. Fortunately, different ways exist to establish safeguards so a divorce does not deprive your child of part of an inheritance.