Trusts and protecting inherited assets from divorce

[formflier]

I am considering making changes to my parents estate planning specifically to protect those assets from a divorce action. 

At the moment I seem to be a fan of a "testamentary trust".  I hope with one or two more consultations with a lawyer, I'll be able to wrap this up and move forward.

Let's just say I clarified that a post-nuptial is out of the picture... .

Several different pieces of property in several different states.

If anyone has thoughts or experiences in protecting inherited assets from divorce... .I would love to listen.

FF

[GaGrl]

FF, my DH has been a financial advisor for 25 years following his active Army service. Just checked with him, and he verified that a trust is necessary, but there are several types of trusts and options - definitely a testament trust is one. He could PM or talk, but says you really need both a financial advisor and lawyer in the states where you and your parents live who can work together. DH does it all the time, usually in situations where parents don't trust that the spouse of one of their children.

Hope that validates you are on the right path... .

[formflier]

FF, my DH has been a financial advisor for 25 years following his active Army service. Just checked with him, and he verified that a trust is necessary, but there are several types of trusts and options - definitely a testament trust is one. He could PM or talk, but says you really need both a financial advisor and lawyer in the states where you and your parents live who can work together. DH does it all the time, usually in situations where parents don't trust that the spouse of one of their children.

Hope that validates you are on the right path... .

Good... I'll shoot you a PM.  Always good to get another perspective.  I'm convinced I have the right estate lawyer for this state.

FF

[flourdust]

It's very much dependent on state law, I'm afraid. In my state, inheritances are individual property, so as long as there's a paper trail and no commingling of funds in a marital account, I don't need to take any special steps. YMMV.

[GaGrl]

There are some trust conditions that need to be specified... .this is a multi-generational situation you are trying to set up.

[ForeverDad]

A few years back I recall that someone asked how to get sanctions to recover expenses of lawyers and court (rather than the court ignoring the request for sanctions as usually happens) and one response was to avoid making it about one parent winning and the other losing.  It was suggested to ask for the sanctions but that the recipients be the children, such as the money being added to an education account for college, etc.  Court might look more seriously at ordering penalties for misconduct or whatever if the children were the beneficiaries.

I wonder if that concept will help as you research your options for trusts.  For example, if some of the funds or properties would be especially at risk or prone to litigation, then determine whether the children should be the foremost beneficiaries of those portions.

The idea would be to make the spouse or ex-spouse look at least a little bad if contesting or objecting to trusts that favored the children.  Maybe something to weave into your trust approaches.

[formflier]

 
Yes... .FD... .that is generally the idea of a testamentary trust.

The "sketch" of the idea that I think we will go forward with is a testamentary trust "for the benefit of" my Mom and all of my Dad's "stuff" will go in there.

Medicare won't "see" it... .because it belongs to the trust... .not my Mom.  Same thing with lawsuits against me.  (divorce... etc)  I would be the trustee but not the owner.  It's not "mine".

The murkier part of the sketch (which I'm trying to work out now)
When my Mom passes, I hope to combine the remainder of what is in the "FBO mom trust" and "my mom's stuff" into one trust "FBO FF kiddos... .all bazillion of them... and their kids... and their kids"

My hope would be that second trust would not be tied to FF passing on or not, if it can be worded correctly.  That it would be there to provide a source of college funds... education funds... .etc etc.  A bit murkier would be fund "to support success".  So a grandkid is doing big things and gets funds to expand a business or something like that.  (I could see more downside in this... .as opposed to helping with a college bill... .even if a kid got into Harvard, but couldn't afford it.  )

A bit of a backstory:  My oldest was a finalist to get int MIT (yeah... that school).  He realize he most likely wouldn't get in (single digit acceptance rates... .if I remember) and honestly, we worried how we would pay for it. 

When my Dad became aware of the concern, he told us to worry about having our oldest do his best... .and he'd worry about stroking whatever checks were needed. 

Another way of saying I know that a trust paying for educational expenses is something my father would approve of.

FF

[Sunfl0wer]

Kind of a side note... .

My friend's exwBPD is aware of the trust monies for her kids.  (I really do not know what legal instrument they used to hold the monies, however, friend's parents have millions, so I imagine the kids have quite a bit of a chunk saved for them for adulthood)

Well (exwBPD... .aka mom) 15 year old boy decided he wanted to start up a business.  Monies are clearly sitting there waiting for him to turn a certain age.   However, mom is clearly using kid now and trying to invent reasons to withdraw monies early.

I imagine the only reason mom has not withdrawn money from the account is she simply cannot without dad's permission.

So son has sent dad pleading emails to gain permission and how important this is, why he needs dad's help, etc.

My point... .
I forsee this being an ongoing issue: Mom using both kids, alienating dad via accusations on how he coulda helped son, etc.  When next kid starts coming of age to have an idea to "need" something monetary, I am certain this legacy of alienating her daughter, trying to lay on the FOG to dad to sign early releasing of monies... .will continue.  (It doesn't even matter to mom too much imo, what is literally and legally possible... .so long as she knows money is there, she will delusionally hold dad the persecuter for her not getting at it.)

I wish there had been a way to keep all this info from mom AND the kids because of the "tool" this future monies has become to damage the kids.
Maybe there is for FF situation?

[formflier]

A good point... .

And, in my mind, pretty much kills the idea of supporting a business.  Education can be much clearer.  I would want to be clearer still that a "car" is not an educational need... .as in "we have to buy a new xyz so Johnny can go to school... .but your Dad won't allow it.  I wonder why your Dad doesn't love you... .?  " 

(I still don't think I get the parental alienation thing right... .)  My wife's FOO could have written that in a much more convincing way...    

Funds would have to be payable directly to the institution... etc etc.

Note:  I've seen this dynamic play out with SIL.  She gets child support and the kids are always bugging their Dad (divorced) for "just one more thing"... ."just came up... "

uggg...

FF

[Sunfl0wer]

I do not know the answer, and hope to read comments for me to also understand... .

However, I did just recall another situation... .

A different friend (dad also coincidentally happens to be with almost unlimited funds... no secret between anyone) well that dad, when each kid got married and was ready to start a family, bought each kid a paid for house.

Now, I am not saying that you should buy every kid a house, however, I do wonder if in some way the monies could in fact be specifically designated in some fashion.  So like can a document be written so that the money is used for school, and upon graduation, kid also gets (insert amount) to specifically be used for a downpayment on his first home?

Idk, maybe kid can have a downpayment without college, idk, just throwing thoughts out there... .
Just wondering how specific one can dictate how money is to be used.  That way to more effectively eliminate a mom from trying to convince a kid to make a purchase she is benefitting from.

(In other example... .my friends mom certainly would be stealing kids profits to his business, or somehow taking a salary off it or someway messing it all up)

[formflier]

Sunflower,

I love the example and the thought.

I consider myself "well to do" and "successful".  I wouldn't use the term "wealthy".  The majority of our assets are not liquid.

I do know a number of wealthy people... .and I'm certainly hoping to be wealthy one day, although that is not a specific goal.

I have more of a "farmer mentality".  If you keep tending your field, some years will pay off and some years will disappoint, but over time... .

Said another way, I'm not looking to hit a home run or grand slam.  Just get consistent base hits...

I would love the idea of buying a house although I would love the restriction that it could never be mortgaged... .

Yeah... I'm a control freak at heart... .   But you get the "financial values" that I would be trying to teach with that.

FF

[Sunfl0wer]

Can a trust provide an interest free "loan" (keeping lein on house) but if house remains with kid for over 20 years as a "homestead property," loan is forgiven?
(Maybe there are even stipulations for "qualifying" for said loan, idk)

Idk... .
that is getting tricky because kid may want to get divorced or such
But am tossing out a thought.
No idea tho of real estate laws!

[formflier]

That's exactly the kind of ideas that I was hoping to get by posting

Very pragmatic.  I can certainly ask this of the estate attorneys.

I love the idea... and the control freak in may likes the idea of having a deed of trust... .with certain conditions.

FF

[whirlpoollife]

FF , my xh couldn't wait for my parents to die so he could inherit their money and assets.
I planned on divorce but my mom passed at the same time.  Her property was in another state.  One of her properties was a family business. Purchased long before my 27 yr marriage.
But made into a business during my marriage, which turned it into a marital asset with xh.  My L had me hire a CVA ( on memory, Gagirl can correct it if I'm wrong) for that one . ( certified value accountant ) .  He valued my share of that property over the years which brought down in figure the actual money I received.  Xh received over 60% of it but was less than the monetary figure.  Same for the marital house . He received more than 50% because I am in an equitable state and they had to even out the money I received in inheritance to his nothing.
And the value of the marital house was at the time of settlement , not three years back when I first filed.
A community state would be different except for the value would be the same ... .when settled.

On other property that went in to a trust xh received nothing but ... .
From the time my mother passed and my filing for divorce, any increase in value of that property became marital property . I had to get appraisals on both times.
It some time to get the properties sold. When they did , there were capital gains.
Xh did not recieve a portion of that but they increased my nothing income into income greater than xh.  xh filed for alimony from me then. That went to court $$ and he won. Fortunately prior to , at settlement of divorce , there was to be no alimony to either party after divorce.   All I had owed was retroactive but it had a stopping point.  I had the option to make payments on that alimony which I took rather than giving him a lump sum.

Now divorced, and two children, I have a basic trust with stipulations that my kids do not receive inheritance till a certain age. 

I don't know if any of this helps but that was my experience . I don't explain things that well so feel free to ask questions

[formflier]

 
Exactly the kind of mess I'm hoping to avoid.

I would assume that if your mothers stuff had gone to a trust "for the benefit of" your chidren, it would have been "immune" from the divorce, yet left you in control if you were the trustee.

Thoughts.

FF

[GaGrl]

Yes, Certified Value Accountant.

It can all get quite complicated!