Keeping It In The Family – How To Protect Assets From In-Laws.
One of the biggest concerns for many parents is “if my child gets divorced, will their ex-spouse end up with half of our family farm?”
When you leave your kids’ inheritance to them outright as individuals, yes, it is possible it could be split in a divorce. Yes, inherited property is considered separate property when it is inherited. But, if your child “commingles” the property, perhaps by depositing cash into a joint account with their spouse or using joint money to put a new roof on the house they inherited from you, the property could now be considered joint property. Judges have broad discretion in divorce proceedings.
Trusts Provide Better Protection
Instead of distributing assets directly to a child, parents can leave assets in a properly drafted trust for the child’s benefit.
This approach can provide several advantages:
- Better protection from divorce claims
- Creditor and lawsuit protection
- Protection from financial mismanagement
- Greater ability to keep family assets within the bloodline
For families with ranch land, family businesses, cabins, or investment property, trust planning can be especially valuable. When property left to your kid is in a trust, it is much harder for that nasty ex-in-law to claim that the property was joint marital property.
Trusts Do Not Mean Lack of Trust
Many people assume trusts are only for the ultra-wealthy for children with addiction or financial issues. In reality, modern trusts are often flexible and can allow children significant control while still preserving important protections. In fact, we often prepare a type of trust in which responsible children are allowed to serve as their own trustee, yet still get that asset protection against divorce and lawsuits!
The Bottom Line
Leaving assets outright may be simpler, but simplicity is not always the safest option.
For Montana families concerned about divorce protection, creditor protection, and “keeping it in the family”, leaving assets in trust is often one of the most effective estate planning tools available.
