How Divorce Can Affect Your Estate Plan in Cary, North Carolina
What Happens to My Estate if I Get Divorced or If My Child(ren) Get Divorced?
Unfortunately about half of all marriages end in divorce. Since divorce is prevalent and common these days, it is something worth considering, particularly in your estate plans, to protect your assets. When divorces occur, the courts will work out how the spouses' assets are divided. Within estate plans, other than pre-nuptial or post-nuptial agreements, there is not a lot one can do to protect yourself from your own divorce. However, there is so key action you can take to prevent your ex-son or ex-daughter-in-law from walking away with half of your child's inheritance. Here's what happens. When your son or daughter, or any other beneficiary for that matter, receives his or her inheritance from you they are most likely going to "co-mingle" the money with his or her spouse. He is going to put the money in a joint bank account with his wife. Or she will use it to buy a house with her husband. Once the inheritance is in both your child's and your child's spouse's name it is now a marital asset subject to division upon divorce. So, if the marriage doesn't last, a judge will decide how much, usually, 50%, goes to the ex-in-law. And if his ex-in-law has kids from a prior marriage or a later marriage I'm sure you know that your grandchildren won't see anything that's leftover. This is also the pitfall even if your child does not "co-mingle" his or her inheritance. If they keep it separate it will not be a marital asset subject to division with the ex-in-law. But, when your child's Will says "all to my spouse", then your child has now given your estate assets to his or her spouse. This can cause unintentional or accidental disinheritance. Because what commonly happens is the in-law remarries and updates his or her Will which gives all the in-law has to his or her new spouse, who is not your in-law or your child or anyone you probably would wish to receive your hard earned estate assets.
How to Protect Your Assets from Divorce?
If you worry about the risk of divorce, you need to strongly consider getting a trust. You can provide a legacy gift that keeps the inheritance in the family (bloodline) and keeps in-laws out of your affairs. When an asset is in a trust it is not co-mingled, it cannot be accidentally given to an in-law, and ensures that the family comes first. Sometimes you need to use "Inheritance Trusts" to accomplish this. An "Inheritance Trust" is typically an unfunded trust during your lifetime that is waiting to receive all or a portion of your estate which then provides for your child, grandchildren, and any other contingent beneficiary of your choice. You name who is in control (Trustee) and their powers. It can be a great tool to protect against divorce. A potential downside is that it could make the in-law feel alienated. There are several ways to ameliorate this. The best way depends on your circumstances. It is best to consult an Estate Planning attorney to discuss trusts as well as any pros and cons of your situation.