Protecting your assets is crucial when it comes to estate planning because you do not want your wealth to fall into the wrong hands should your heirs get married or divorced. If you are like most people, one of the primary goals of your estate plan is likely to ensure that your assets are distributed according to your wishes after your death. While that is certainly an understandable estate planning goal, your plan should not stop there. To ensure that you have sufficient assets left to pass down after you are gone, your estate plan should also help protect and grow your assets while you are alive. One important way to do that is to make sure that you recognize potential threats to your assets and counter those threats. To get you started, a Phoenix estate planning attorney at Morris Hall PLLC discusses how to protect your assets from marriage and divorce your.
Divorce and the Threat to Your Assets
Unfortunately, the divorce rate for first marriages in the United States has hovered at around 50 percent for several years now. With that in mind, it is imperative to consider the possibility that you will one day go through a divorce. Even in states without community property laws, a divorce could seriously threaten your assets if you do not make a conscious effort to protect them. All states acknowledge separate property in some form, usually defined as assets owned prior to marriage or inherited during the marriage. What many people do not realize, however, is that co-mingling separate property can convert it to marital property. In addition, income derived from separate property is often considered marital property. Anything considered marital property is fair game for division during a divorce unless you took steps to protect it before the marriage.
Marriage and the Threat to Protecting Your Assets
The idea that marriage alone can threaten your assets may seem strange at first; however, the reality is that it can. Not your marriage though, the marriage of a child. In fact, the damage your daughter or son-in-law could do to the value of your estate is potentially devastating.
Most parents amass assets with the hope and intention of passing at least some of those assets down to their children eventually. When you make an outright gift to an adult child, whether as a lifetime gift or a bequest in your Last Will and Testament, the assets gifted become the property of your child. If that child marries, those assets potentially become the property of your child’s spouse as well. Those assets are then subject to division in a later divorce, to being squandered by a spendthrift spouse, or to being inherited by a spouse if your child predeceases his/her spouse.
Just as your own divorce puts your assets at risk, so does the divorce of an adult child to whom you gifted assets. A son or daughter-in-law may also squander those assets if he/she has an addiction, gambling problem, or simply lacks money management skills. Finally, the assets you gift to an adult child might end up being passed on to a spouse and eventually to someone you don’t even know unless you takes steps to prevent such an outcome.
Protecting Your Assets: How To Do It Effectively
The good news is that there is a wide range of asset protection tools and strategies that can help you protect your assets from the numerous threats related to marriage and divorce. Entering into a prenuptial agreement, for example, protects your assets from being lost during your own divorce. Using a trust to gift assets to your adult child, in lieu of an outright gift or gifting in your Will, can go a long way toward protecting those assets from the many threats related to marriage. Not only can a trust prevent those assets from winding up in the hands of a son or daughter-in-law, but it can also prevent your own child from using the assets in a way you don’t approve of or from squandering the assets.
Contact Our Phoenix Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about protecting your assets from marriage and divorce, contact one of our experienced Phoenix estate planning attorneys at Morris Hall PLLC by calling 602-249-1328 to schedule your free consultation today.
- Jim Morrison Legacy Provides an Estate Planning Lesson - December 5, 2023
- Estate Planning Tips for Solo Seniors - November 17, 2023
- Inheritance Planning: Have You Considered Digital Assets? - November 16, 2023