How To Protect YOUR Assets When Your Child Is Getting Divorced
If your child is getting married, you’re probably not thinking about how to protect your assets. After all, a child’s wedding day is one of the happiest occasions in life for most parents, especially when they approve wholeheartedly of that child’s choice of mate.
Sometimes, however, the choice is not always welcomed and parents become concerned about how to protect assets they plan to leave their children in case of a divorce. Alternatively, you may welcome that child’s choice of mate, but can’t control what happens in their lives ... and even if you like your child’s mate, you may not be interested in that person inheriting your, or reaching your, assets in the event of divorce.
Fortunately, there are several estate planning devices that allow you as parents to protect your assets from those who marry – and may divorce – their children:
Irrevocable trust – one of the most common ways to pass assets to children, an irrevocable trust provides asset protection as long as it is not mixed with marital funds.
Preservation trust – this type of trust can be used to protect assets from a divorce by having your child place his or her assets into the trust and naming a beneficiary that is someone other than a spouse.
Post-marital agreement/contracts – many parents are unsuccessful in negotiating a prenuptial agreement before the wedding, and find it easier for children to accept the drafting of a post-nuptial agreement later on to protect family assets. Helping out a couple during their marriage is a typical situation for many parents. However, this “help” can have unintended consequences during divorce. Example: parents agree to pay off mate’s student loans. No contract or post marital agreement is entered into. What happens after divorce? The mate is off scot free on the loan and, in Michigan (as well as most other states), will still be entitled to an equitable distribution of marital property. The parent’s assets are lost forever.
If you’d like to learn more about Trusts, Pre- and Post-Marital Agreements and other aspects of estate planning, call our office today to schedule a time for us to sit down and talk. I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today (248)787-0947 and mention this article.