Providing Divorce Protection for Your Children
Despite the fact that the Baby Boomer generation has seen high divorce rates, my experience has been that parents of Baby Boomers generally did not wish to discuss divorce protection for their children and grandchildren. Times have changed…
Most people now acknowledge that divorce is a common occurrence. Therefore, why not provide your beneficiaries with the opportunity to protect their inherited assets in the event of a future divorce?
Traditional estate planning, including the use of direct beneficiary designations, wills, and “bare bones” living trusts, usually provide for an outright distribution to your beneficiaries upon your death. Most often, married beneficiaries will then promptly place these assets into various accounts titled jointly with their spouses. Even if your beneficiary keeps the account titled solely titled in his or her own name, he or she may later add to the account using marital income. At that point, the account has been comingled and may no longer be considered individual property (also known as separate property). Thus, in the event of divorce, half of your hard-earned assets may end up in the hands of your beneficiary’s ex-spouse.
Rather than distributing your assets outright upon your death, a properly drafted living trust can instead distribute inherited assets to each child or other beneficiary in the form of a divorce protection trust. Each child can act as his or her own trustee, and you can specify that there are no restrictions as to how your child can use the assets of the trust. Any assets that remain titled in the name of your child’s divorce protection trust would be clearly identified as your child’s separate property, not to be divided in a divorce proceeding.
You can also specify within your living trust how the assets of your child’s divorce protection trust would be distributed upon your child’s death. If you wish, you can even provide your child with the power to name his or her spouse as the beneficiary of the trust upon his or her death. However, if there is a subsequent divorce, your child can then change the beneficiary – never losing divorce protection!
Divorce protection is one of the many options available within a comprehensive living trust plan. If you are interested in providing your children or other beneficiaries with divorce protection, if you have minor beneficiaries, if you have special needs beneficiaries, or if you simply wish to make things as easy as possible for your loved ones upon your death or incapacity, you should contact us today to set up your free initial consultation regarding crafting a plan that will best accomplish your desired objectives.
Source: News feed
