Can My Kids Lose Their Inheritance in a Divorce or Lawsuit?

A common question I get from parents is this: What happens after I’m gone and I’ve left all my money to my kids? What if one of them gets divorced or sued or runs into creditor problems? Can I still protect their share of the inheritance?

The good news is probably yes. But there’s an important catch.

If you leave money to your children outright, it typically becomes vulnerable to whatever life throws their way. That includes divorce proceedings lawsuits and creditors. However if you leave the money in trust for their benefit you may be able to protect those assets from those exact threats.

This strategy can help minimize the risk of losing part or all of the inheritance due to legal or financial complications in your child’s life. A properly drafted trust can make it much harder for outside parties to access those funds.

That said it’s important to understand that using a trust adds a layer of complexity. Some clients find these structures too restrictive or cumbersome. You’re also putting limits on how your child can access or use their inheritance in order to preserve the protections you’re building in. These limitations may be necessary to prevent creditors from reaching those assets but they can feel intrusive or overly controlling to some families.

If you’re considering this kind of planning speak with an experienced estate planning attorney who can help you balance protection and flexibility based on your family’s unique needs.

Want to learn more about setting up a trust for your children?

I help families create thoughtful legally sound plans that protect their children’s inheritance without exposing it to unnecessary risks. If you have questions about using a trust to safeguard your child’s future from divorce lawsuits or creditors I can help you design a plan that fits your family’s needs and long-term goals. Or, if you would like me to review or create a trust for you, then click the link below to schedule a call with me today - I’m always happy to help!

To learn 80% of what you need to know about estate planning in less than 30 minutes, check out my full-length video. It’s a quick and comprehensive guide to help you understand the basics and start taking steps to secure your future.

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How to Provide for a Partner and Leave Money for Your Kids

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How to Leave Money to a Child or Beneficiary with Special Needs Without Affecting Their Government Benefits