Protecting your children's trusts from divorce

Texans often work with their estate planning attorneys to structure trusts so that they can pass on family assets to their children. However, if those children and their spouses divorce, they often don't want the spouse to get a portion of those assets in the settlement. They want the money to stay in the family -- not to be split with a spouse who has gone their own way.

Generally, a trust established before a marriage will not be a considered a marital asset to be divided in a divorce. However, assets intended to remain one spouse's only often become commingled with marital assets during the marriage. When this happens, spouses can attempt to keep some of them when the marriage ends.

That's why it's best for people who are beneficiaries of a trust to leave it alone. As one wealth management professional says, "As soon as the money leaves the trust -- unless there's a prenuptial agreement -- the individual has somewhat defeated the trust."

There are things that people can do when establishing trusts that can help "divorce-proof" them from a spouse who believes they're leaving the marriage at an economic disadvantage. For example, if a trust is set up so that the beneficiary can't seek a distribution from the trustee, the assets in that trust legally don't belong to the beneficiary.

When a couple who has set up a trust for their children divorces, that can complicate things as well. For example, unless a trust specifies the child(ren) it is for or at least that a trust is for children from that couple's marriage, it could potentially be used by one or both of the spouses for children from future marriages. That's why the language of the trust is crucial.

Most people don't want to think of the possibility of divorce -- their own or their children's -- when drafting an estate plan. However, it's best to plan for as many potential future events as possible. Your attorney can help you do that.