I repeatedly hear from clients that they are worried about an adult child losing his or her inheritance to creditors or a divorcing spouse. These are valid concerns. If a child owes money to the IRS or other creditors, an inheritance can be grabbed to satisfy the debt. Similarly, if a child receives an inheritance outright and commingles that inheritance with their own family finances, the inheritance will probably become something a divorcing spouse can get at.
The best way to protect against these unfortunate events is by using a trust. A simple but valuable planning technique is to add a properly written trust in your Will for an adult child. You decide how, when and how much the child can get out of the trust. Then if a creditor comes calling or a spouse files for divorce the assets that are still in the trust will be protected. People often think you have to be rich to need a trust. That is not necessarily the case. Trusts can be a value planning tool for everyone. If you have any of these kinds of concerns, give us a call.
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