How Can I Prevent My Child’s Spouse from Accessing Their Inheritance?

For most parents, the beneficiaries of their estate plan are one or a combination of children and grandchildren. While this may be the case, there is often a concern about the ability of a child’s spouse to access the assets left for them. Specifically, questions arise as to what happens to a child’s inheritance in the event of divorce without the proper safeguards. Additional concerns include disagreements in an in-law’s spending habits. It is a delicate balance between ensuring your adult child can access assets left to them, while also protecting these assets from a child, or grandchild’s, spouse. While having a will is a good first step to ensure their child receives the assets left to them, it won’t stop a child’s spouse from accessing them. It is important to engage legal professionals who understand how to strike the balance in an estate plan, with various planning options to accomplish this goal.

One option to help prevent your child’s spouse from accessing the inheritance is to ask your child to sign a prenuptial agreement with their betrothed or, if they are already married, a postnuptial agreement. However, this method is not foolproof. If your child comingles the inheritance funds in a joint account or uses the funds to pay for marital expenses, such as a home or bills, your child’s spouse may be able to argue that the funds became marital funds.

A second, and better option, is to set up a trust that will administer the funds on behalf of your child. The trust would name your child as the beneficiary. The trust is revocable during your lifetime so you maintain full control over it and its assets. You select trustee(s) who will manage the trust after your death, at which time, it becomes irrevocable. The trustee(s) could either be an independent third party or your child plus an independent third party. While it is legally permissible to make your child the sole trustee, that would enable your child to give their spouse access to the trust funds.

You can specify how often your child receives distributions from the trust and the value of the distributions. You can also specify how the distributions are used. To add another safeguard, you could even specify that instead of distributing funds to your child, the trust should pay for all purchases directly. For example, if your child wants to buy a home, the trust pays the home seller directly, rather than disburse the funds to your child to pay for it.

It is also important to list backup beneficiaries, such as your grandchildren, other loved ones, or charitable organizations that will inherit the trust funds, if any remain, after your child’s death. This can help preserve your legacy within your family and/or charitable organizations for decades to come.  

The estate planning attorneys at Huth, Pratt & Milhauser have worked with hundreds of South Florida families to develop strategies to protect their hard-earned assets and ensure they are distributed following their wishes. Contact us today for a free consultation to learn how we can help your family.

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