How do you protect your married daughter in your trust? There are few things in life that we fight to protect more than our children. We make plans for their future and help teach them how to achieve success and stability. Watching your child find the person she wants to marry and start a life with is a joyous and exciting time. However, it is not uncommon for parents to worry about the future and want to ensure that a daughter’s financial security is certain even in the event of divorce. There are some techniques you can use involving trusts that can help to protect your married daughter.
Like any type of probate or estate planning, the key to making sure that the trust you establish for your daughter actually protects her future is to plan ahead. California is a “community property” state. This means that most assets received by either party to a marriage before the marriage begins, are separate property and will not be divided into two in a divorce. You must instruct your daughter to refrain from mixing the assets with her husband’s assets, or their joint assets. Likewise, you must tell your daughter not to change the character of the assets by agreement.
In other words, one of the best ways to make prevent the conversion of separate property gifts and inheritances, is a trust you establish to protect your daughter. The assets of a trust created by you will not be divided in a divorce and given to the husband. However, if your daughter is ordered to pay child support, even your trust can be reached under certain special circumstances. Your revocable trust is therefore, a way to protect your married daughter’s interests.
With a revocable trust, the person creating the trust retains control over the assets and distributions. The assets inside the trust are not transferred to the beneficiary. This means that if you create a revocable trust, your daughter’s spouse will not be entitled to a portion of the assets in the trust, as those assets do not belong to your daughter. This will be true even if the revocable trust is created by you after the date of your daughter’s marriage. This assumes that the only assets in the trust are yours. Your daughter cannot hide her own assets in your trust, and we caution you against this.
Irrevocable trusts can also protect your daughter’s interests. With an irrevocable trust, discretionary provisions can protect your daughter. If the beneficiary has no control over when the assets will be distributed, then he or she has no ownership interest in the assets inside the trust. This means that, as with a revocable trust, the assets inside the trust will not be subject to distribution in the divorce.
We have extensive experience in helping our clients with careful estate planning to protect their children. Call us today to talk about your options. Call 818.340.4479.
