Archive for Sunday, January 27, 2002

Irrevocable trust will protect assets intended for children

January 27, 2002


Since many states give courts broad discretion in determining whether nonmarital property has been used in a fashion that transmutes (changes) it into marital property, there is always the possibility that gifts or inheritance owned at the time of divorce, regardless of origin, could be distributed to a spouse. For that reason, planning before the child's marriage by premarital agreement or after the marriage by postnuptial agreement can help.

But assets designed to help your children may also be up for grabs if an adult child meets an untimely death and either 1) the will leaves all assets to his or her spouse or 2) the surviving spouse receives a statutory share of the estate.

Thus, if you want to make sure your children and grandchildren benefit from your wealth, consider not leaving assets outright to your children but, instead, to an irrevocable trust, which will protect the assets you set aside for your children. Because of the complexities involved, you most certainly should consult with a qualified attorney who is familiar with divorce, taxation, and estate planning to help you.

When a divorce decree fails to make provision for the college education of a child, and the father who enjoys the earning capacity of a professional will not contribute to the child's tuition, how does a single mother meet these expenses? The father's support ended when the child reached age 18. Shouldn't the lawyers who handled the divorce have anticipated the possibility of this need and have made provision in the decree?

Often, when children are young at the time of divorce, it is impossible to predict 1) Whether a child will be deserving of a college education when the time comes, 2) The cost of the education and the financial condition of the parents at that time, and 3) Who should pay for the education and in what proportions.

Because the financial situations of parents and the cost of education dramatically change with the passage of time, it would be unreasonable to expect that a lawyer could present a case containing these predictions years in advance. It would be equally unreasonable to expect a father or mother to agree to an open-ended education arrangement in advance when the cost is unknown.

If the child and parents cannot resolve the questions of entitlement, cost, and contributions, then the child must resort to the courts to resolve the contributions of both mother and father based on their current financial situations.

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