How To Protect Your Child’s Inheritance From Divorce
When faced with divorce, parents typically think about what arrangements need to be made for child custody, visitation, and child support. But while those agreements impact the immediate day-to-day events of your child’s life, it’s important to consider longer-term implications, such as what the divorce means for your child’s inheritance.
There are a few things that you, along with the help of an experienced divorce attorney, can do to protect your child’s long-term financial future. Let’s look at how New Jersey divorce law can impact how your children inherit money (and how you can protect that money from an ex-spouse).
Why your child’s inheritance may be at risk in a divorce
Whether you and your former spouse share a child together or have been living in a blended family, divorce may have implications for your child’s inheritance.
Once your divorce is finalized and your marital assets are separated, you may believe that your ex-spouse no longer has any control over your children’s inheritance. But this isn’t necessarily the case.
According to New Jersey law, children under the age of 18 cannot collect or control their inherited funds without an adult to manage them. In such cases, the court appoints a guardian to control the assets until the children are old enough to legally take control of them. Typically, the court will appoint the living parent or guardian, and as a result, your ex-spouse would become responsible for the inherited property if you pass away before your child turns 18.
Once they are granted control over the funds, your ex-spouse can do anything they wish with the assets. If you believe that you cannot trust them to hold onto the money until your child turns 18, or simply don’t want to take the chance, seek assistance from an experienced family law attorney.
Even after your child becomes a legal adult, they could risk losing their inheritance in their own divorce. The money you leave them could become subject to the State of New Jersey’s equitable division of marital property just like any of their other assets.
Pre-marriage planning: how to protect your child’s inheritance before tying the knot
Careful pre-marriage planning is one of the best ways to protect your child from losing any of their inheritance. Ideally, you should discuss how marital funds will be divided in the event of divorce prior to getting married. You may also wish to discuss estate planning and trust fund options to protect your child’s inheritance in case either parent dies after a divorce.
Prenuptial agreements
Many people shy away from prenuptial agreements, but they are effective in keeping an inheritance separate from the couple’s marital funds, especially if one party is bringing a child into the marriage. If this is true for you, even if your child hasn’t received an inheritance yet, it can still be included in the prenuptial contract. The contract details how real estate and funds will be divided, and it is the only way to override New Jersey divorce laws that make marital property subject to equitable distribution.
If you’ve already taken care of your own marital funds, you’ll want to encourage your adult children to have their own pre-marriage plan for determining what is separate property. They should discuss with their future spouse the options of maintaining a separate bank account or how they will treat inheritance funds if they should ever divorce.
If arrangements are not made in advance, New Jersey law applies. This means that a judge will divide the marital assets equitably as they see fit.
Estate planning
An estate plan can work very effectively alongside a prenup to protect your child’s inheritance.
While a prenup addresses the rights of both parties to marital assets and how they should be distributed upon divorce, an estate plan details how you want your estate and assets (not just property impacted by marriage) handled after you pass away. It also includes your wishes with regard to guardianship, final arrangements, and more. It’s important to make sure that your estate plan and prenup align, though, as they can potentially create conflicting guidance.
Trusts
A trust is an excellent way to protect your child’s inheritance both during and after a divorce. It’s also perfect for young children and legal adults. As long as the money remains in the trust, it cannot be subject to equitable division. However, it becomes marital funds when your adult child distributes part or all of the funds into a joint bank account.
A trust can also keep the money out of the hands of your ex-spouse until your child is 18 because you may choose anyone to be the trustee in charge of the assets. A trust also gives you the opportunity to select beneficiaries and dictate how the funds may be used by them.
Questions about inheritance and divorce? Our attorneys can help
A New Jersey attorney who specializes in family law can help you discuss the options best suited for your family and the circumstances. They can provide both pre-marriage advice and post-divorce counseling to ensure that your child is protected. A family law firm can even help you set up a trust account and a will to avoid the stressful probate process.
Dughi, Hewit & Domalewski has more than 40 years of law experience, and we’ve had the opportunity to protect countless New Jersey family legacies from potential consequences due to divorce.
Contact our firm to learn more about how to keep your child’s inheritance safe in the event of a divorce.
