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People often come into our estate planning law firm and tell us they want to make sure that they set up their estate planning legal program so that their children’s inheritance is protected for the children and from the child’s spouse and step-children.

There are many reasons why people want to protect their children’s inheritance from in-law issues. Sometimes they feel a child’s spouse will spend the inheritance too quickly. Sometimes parents get aggravated when their in-laws won’t let them see their grandchildren as often as they’d like. Sometimes parents feel that the children will be influenced by their spouse to give or leave the inherited assets to the child’s spouse or the child’s step-children.

If no extra precautions are in place, then here is what can and does happen. The moment a child receives an inheritance, the inheritance is the separate property of the child – not the community property of the child and their spouse. And if the child’s spouse has influence over the child, the child may squander the inheritance. But even if the child is not influenced, note that the fruits of separate property (or rather, income produced by separate property) are community property. So if your child inherits $500,000, and that $500,000 produces interest, dividends, or rental income, then that income is community property. And if separate property and community property get so commingled that you cannot tell what is separate and what is community, then it all becomes community because of our presumption that a thing in the possession of a spouse is presumed to be community, even though a spouse may prove that it is separate.

If the child’s inheritance, either through influence or commingling, becomes community property, then your child loses half of the inheritance upon divorce.

Discussions with clients regarding this issue usually involve four parts. First, how do we ensure that our child’s inheritance remains separate. Second, how do we ensure that the fruits (or income) of the child’s separate property remain separate. Third, how do we keep our child’s spouse from influencing our spouse into doing something stupid. And fourth, how do we ensure that when our child later dies, the remaining portion of our child’s inheritance passes along to our child’s children (and not our child’s spouse or our child’s step-children).

One option for the parents to protect their child’s inheritance is to leave the child’s inheritance to the Child’s Inheritance Trust. Leaving assets to a trust for your child can help prevent the commingling of inherited assets with community property. In addition, a child can sign a Declaration reserving the fruits of separate property as separate property. This can also prevent commingling of separate with community, and it will keep income separate. To be effective, the a copy of the Declaration must be provided to the spouse prior to the Declaration’s filing in the conveyance records in the parish where the child owns separate real estate, and also in the conveyance records of the parish where the child is domiciled.

Part of your discussion regarding how to set this up will involve a discussion about who should be the trustee of your child’s Children’s Inheritance Trust. Even you are overly worried about your child’s spouse having too much influence over your child, perhaps you would name someone other than your child as the trustee.

Another area of this that parents like is that if you set up your child’s trust the right way, you can ensure that when your child later passes away, any remaining trust assets would pass along for the benefit of your child’s children, and not your child’s spouse or your child’s step-children, effectively keeping the inheritance in the blood lines.

If you want to talk to us about arranging your legal affairs the right way for your children, and you like the concepts discussed here, call us up and say you’d like to discuss establishing an estate legal program that includes the Children’s Inheritance Trust. Just call 866-491-3884 to start a conversation.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450…(read more)

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Protecting a child’s inheritance from their parents’ divorces is a topic that must be approached with caution and consideration. Divorce can be a difficult and emotional time for the entire family, and it is important to prioritize the well-being and financial future of any children involved. By taking proper legal and financial precautions, parents can ensure that their child’s inheritance remains protected even in the event of a divorce.

One of the first steps parents can take to protect their child’s inheritance is to establish a clear and legally binding trust. A trust allows parents to set aside assets and property specifically for their child, thereby safeguarding those assets from being subject to division during a divorce. By designating a trustee, usually a trusted family member or close friend, parents can ensure that the assets are managed and distributed according to their wishes, even if the parents are no longer together.

In addition to establishing a trust, it is also crucial for parents to obtain a prenuptial or postnuptial agreement. These agreements outline each party’s rights and obligations regarding property and assets in the event of a divorce. Including provisions about the child’s inheritance can help protect those assets from being divided or claimed by the other spouse. It is advisable to consult with a qualified family law attorney to ensure that the agreement is legally valid and in compliance with local laws.

Furthermore, it is essential to maintain proper documentation of any assets or contributions made towards the child’s inheritance. Keeping thorough records of financial transactions and relevant legal documents can help substantiate the existence and ownership of the child’s inheritance. This documentation can be critical in protecting those assets during divorce proceedings, ensuring that they remain solely for the benefit of the child.

When it comes to preserving a child’s inheritance, communication between parents is vital. Openly discussing and agreeing upon a plan for the child’s inheritance can help prevent misunderstandings and disputes down the line. By working together, parents can establish a cohesive strategy that prioritizes the child’s best interests and protects their inheritance, regardless of any changes in the family dynamic.

Finally, parents should regularly review and update their estate planning documents, including their wills and trusts, to reflect any changes in their financial situation or family circumstances. Life is constantly changing, and it is important to ensure that the child’s inheritance is aligned with the parents’ wishes and current financial situation.

Protecting a child’s inheritance from their parents’ divorces can require careful planning, legal precautions, and open communication. By establishing a trust, obtaining a prenuptial or postnuptial agreement, maintaining proper documentation, and regularly reviewing their estate planning documents, parents can help safeguard their child’s financial future. It is essential to consult with professionals, such as family law attorneys or estate planners, to ensure that the proper measures are in place and that the child’s best interests are protected throughout the divorce process.