Wednesday, April 27, 2016

But I Don’t Like or Trust My Child’s Spouse! Trusts, part two

In the post immediately prior to this post, I discussed the use of a trust to prevent a spendthrift child from squandering his or her entire share of the parents estate.  This form of trust has another purpose as well.

Consider the situation where mom and dad really dislike or do not trust their child’s spouse (for fun, let’s call him or her the “evil spouse”).  They don’t want the evil spouse to have access to their child’s share, lest the evil spouse divert those assets and use them for purposes that Mom and Dad never intended.  Customarily the parents intend that the child’s share pass on to the next generation at the death of the child, but if the evil spouse can access the assets, he or she may have other ideas.  So what are Mom and Dad to do?

The answer again is to establish a trust for the benefit of their child.  Such a trust will be substantially the same as the one described in the last post.  While the purpose of a trust for a spendthrift child is to protect against inappropriate spending, the purpose of a trust in this case is to keep the evil spouse from getting access to the assets so long as they remain in the trust.  The evil spouse will have access only to those assets which have been distributed outright to the child.  The child has the option to maintain assets in trust to keep the assets beyond the reach of the evil spouse.   This will prevent the evil spouse from commandeering the assets meant for the child.  Mom and Dad will rest much easier knowing that the evil spouse only has access to the trust assets to the extent their child chooses to request outright distribution, and one can only hope that the child has the wherewithal to prevent the evil spouse from spending the assets in ways that were not intended.

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