With many marriages in New York and other states ending in divorce, it is only natural for parents to want to protect their children’s inheritances from being subject to property division in a divorce settlement. Some parents find that establishing trusts is the most appropriate way to do this. Including a trust in estate planning can provide peace of mind to a parent who wants his or her child to have something on which to fall back if the marriage should end.
New York is an equitable distribution state in which each property is divided in a fair way if the couple should divorce, but each spouse is entitled to his or her separate property such as property acquired before the marriage or an inheritance. However, if inheritance funds are combined with the jointly-owned assets of the couple, it becomes marital property that will be subject to division. This happens when inheritance is used to fund payments on a car, a house or if it is deposited into a joint bank account.
If an inheritance is held in a trust, commingling will not take place. If the child uses funds from the trust to finance assets in his or her name only, the inheritance will remain separate property, and it will be protected in the event of a divorce. Some parents choose to wait for a few years after the wedding to see how it fares before establishing a trust in the child’s name.
Trusts offer various opportunities to protect assets, and anyone with questions about them can consult with an experienced estate planning attorney in New York. A lawyer can explain the different options along with their pros and cons, and assess the client’s unique circumstances before providing advice. That will allow the client to make informed decisions about protecting assets for different purposes.