High net worth parents in Tennessee and around the country are usually interested in passing some of their wealth on to their children. They may view trusts as a way of doing so. For example, trusts can be set up with conditions such as where an adult child can’t access the full balance until they reach a certain age. Or trusts may be tied explicitly to goals like post-secondary education.
Consider a trust
When a child reaches their late 20s or early 30s and shows signs of stability, their parents aren’t just proud. They may also breathe a sigh of relief. Perhaps it’s not necessary to worry so much about trusts anymore. However, this is premature. Without the benefit of strategy and instruments like a trust, an adult child’s inheritance can be at risk during a divorce.
Reasons to use a trust
One of the reasons to keep money in a trust for an adult child is to keep those assets separate. A trust in their name, especially if it’s only used to pay for assets held in their name, can act as a shield. It may keep assets from being considered part of the marital estate to be divided in the event of a divorce.
Sometimes, it can be hard to remember that estate planning isn’t just for death. It’s for life and all the ups and downs that come with it. It’s important to revisit an estate plan over time, even when laws are favorable to wealthy families. No matter what happens with limits to the size of the gift exemption, it’s crucial to always have a plan for the worst. Trusts can help people maintain their family wealth across generations when they’re used properly.
It’s always a good idea to seek advice from financial and legal professionals when creating or managing a trust. Using attorneys who are up to date on family and inheritance laws can help prevent big problems in the future.