In the course of my practice as an estate planning attorney, this topic will sometimes come up. Occasionally, I will have clients that do not trust their daughter-in-law or son-in-law and want to protect their children's inheritance from divorce claims. Unfortunately, without proper planning, this can result in the adult child losing a portion or all of their inheritance due to a divorce claim from a former spouse.
In Tennessee, when two parties get divorced, their assets are subject to what is called "equitable division of marital property." Also, equitable does not necessarily mean equal. For example, let's say John and Jane got married, and 10 years later, Jane filed for divorce. Further, let's say John received an inheritance from his mother in the amount of $150,000, and prior to the divorce, John deposited that into a bank account. A divorce court may rule that this is subject to equitable division in divorce, and court could rule that 70% (or even higher) goes to Jane! I am sure that John's mother would be devestated to know that the money she saved her whole life went to her son John's ex-wife.
However, there is a legal strategy that you can pursue to protect your children's inheritance from divorce claims. This is commonly referred to as a Children's Inheritance Trust. It is a way for your adult children to keep their inheritance separate, and thereby, protect the inheritance from future divorce claims (in addition to creditor claims, lawsuits, predators, and themselves!)
If you have questions about how you can protect your children's inheritance from divorce claims, I encourage you to download my free report on protecting your estate and your children's inheritance from divorce, creditors, predators, and other lawsuits.
If you need to speak with us today regarding these concerns, please contact our office, we are always here to help!
Daniel A. Perry