Ensuring that your estate assets are passed down according to your wishes after you are gone is likely one of the primary goals of your estate plan; however, your plan should not stop there. In order to maximize the assets you have to pass down when the time comes, your estate plan should also help protect and grow your assets while you are alive. To do that, you need to recognize potential threats to your assets. A Moline asset protection attorney at German Law Group explains how marriage and divorce are both among the potential threats to your assets.
How Can Divorce Threaten My 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.
How Can Marriage Threaten My 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
The good news is that there are 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 a Moline Asset Protection Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about how marriage or divorce might put your assets at risk, contact a Moline asset protection attorney at German Law Group by calling 701-738-0060 to schedule an appointment.