A common problem that Trust lawyers in Tampa encounter – perhaps unexpectedly – is how the assets of an estate are handled when a beneficiary goes through a divorce. While we don’t want to put negative thoughts out there regarding our children getting divorced, losing the inheritance you left behind in a messy divorce would certainly be an extra blow to your child. That’s why we strive to work with our clients to ensure that their children end up with their rightful inheritance, no matter what happens.
Consider this example: a wife inherits $500,000 from her parents. Most state laws say that the $500,000 is protected in the case of a divorce and will revert to the wife. However, if the money was invested in any way that caused it to grow, then anything over the initial $500,000 investment is considered marital property and subject to divorce procedures.
An estate planning attorney may suggest creating a trust to avoid this outcome. The trust would be structured in a way that allows the child ongoing access to the funds but would maintain possession of the trust assets. This limits his or her “ownership” of them, which keeps them from becoming marital property.
Your attorney may also advise you to get specific about how the funds in the trust are to be used to ensure they stay safe. For example, you would not want a situation where your child receives regularly scheduled distributions, as that money would then be considered marital property. Your child should instead need to request funds from the trustee, who will then handle distributions.
You should be aware that each state has its own rules regarding what happens in a divorce that involves inherited assets. You want to make sure that your estate planning spans Florida law as well as any states where your children reside, if outside the state.
While the need to build in some safety mechanisms may be more obvious if you have a good sense that your child’s marriage is in trouble or will not last, it’s still important to remember that the future is constantly in flux and that the only real constant is change. Putting a contingency plan in place just makes sense. Please call us at (813) 438-8503 to set up an initial consultation and discuss any concerns you may have about estate planning.