I was recently speaking with a couple from Mt. Juliet. They had been married for a number of years and they had two children who were both recently married. We spent several minutes discussing their family and concerns that were pressing on their minds. This couple owned a home, a few cars, and about $400,000 in various other investments and other bank accounts. We discussed many concerns they had including how to probate and making the estate settlement process simple for the surviving spouse and then for their two children after they were both gone.
However, their biggest concern was about one of their son’s wife. Although they love both of their children and believe they have been responsible and always made the right decisions in life, their concern is about their son’s new wife. This couple told me that they have never had a good relationship with their son’s wife and have concerns with how she treats their son. Therefore, their concern was what would happen if their son gets a divorce in the future.
After discussing this couple’s concerns, I determined that their biggest concern was protecting their children’s inheritance from divorce claims by a future spouse. So, the possible solution to their concern that I discussed with this couple is referred to by lawyers as a Domestic Asset Protection Trust. I explained that we could design and customize a trust for them that would protect their son’s inheritance from any future claims by either a future spouse or future creditor. However, we also discussed some very important rules that would need to be followed when setting up this trust including: (1) the trust must be irrevocable, (2) the trustee of the trust cannot transfer his/her/it’s entire interest in the trust, (3) the trust must be governed by Tennessee law, and (4) the trustee must be a Tennessee resident. I explained that if we customized a Domestic Asset Protection Trust for their family addressing all these specific needs, we could protect their son’s future inheritance in the event he gets divorced from his wife. To say the least, this couple was relieved by the recommendation that I discussed with them.