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Estate Planning

Divorce and Inheritance: What Happens to My Money if My Child Gets Divorced?

When you leave assets to your children in your Will, your children inherit those assets without any strings attached. They can do whatever they want with the assets. Typically, they will have their own estate plan, and leave those assets to their own spouse and children. Usually, clients are not concerned about that type of scenario. Parents may have some concern when the asset is a family property. If their child’s marriage is in trouble, the spouse may walk away with a family property as part of a divorce settlement.  A parent with an unmarried child may want to protect the child from fortune hunters.

In all of these situations, your money could pass out of the family to a spouse who will then re-marry and leave “your money” to their new family. Your grandchildren may never see the benefit of the money you have left for your children.

Is there a way to protect your money for your own family?

The answer requires looking into divorce laws in Massachusetts. Massachusetts is unique in that in a divorce all the assets belonging to either member of the couple are available for division. The Court can divide any asset whether it is in the name of the husband or the wife, and whether or not it was owned by either person before the marriage. The Court can also divide assets which were inherited from the family of the couple. In fact, although the Court cannot divide money owned by the parents who are still alive, the judge can consider the potential amount of money a person will inherit from his or her parents!

The process is unpredictable because every case is different. Different judges make different decisions. Most divorces do not result in a trial. Most of the time, the couple settles using mediators or lawyers and divide their assets themselves. Even a settlement, however, takes into consideration the fact that a judge could award one spouse the trust or inheritance of the other.

In this blog post, we will look at inherited money. We will look at money in a family trust in another blog post.

Divorce and Inheritance

divorce and inheritanceThe Court considers many factors when looking at whether an inheritance could be divided in a divorce. Was the property kept separate or incorporated into the marital assets? Did the couple rely on the money for their life style or was it mostly unused? If the money was treated as a joint marital asset, chances are the Court will divide the money as part of a divorce. If, however, the money is kept in a separate account and not used by the couple, the Court may allow the person who inherited the money to keep it.

Massachusetts is also unique in that it has a process for the Court to discover the value of a potential inheritance. The opposing spouse will ask for a “Vaughn Affidavit.” The Affidavit sets out, in general terms, the size of the parents’ estate(s) and the last time their estate plan was updated. If a person’s parents are still alive and relatively young and healthy, the parent’s money is not taken into account as an asset. If, however, the parents are very elderly and sick–the Court may take the value of the parent’s assets into consideration. The Court recognizes, however, that the parents may always change their estate plan and disinherit their divorcing child.

The suggestions below are not, by any means, a guarantee that your money will be protected in the event your child is divorced.

What Can You Do?

  1. Insist your child create a pre-nuptial agreement as a condition to receiving an inheritance. Make your children aware of this requirement before they become part of a serious relationship. They should understand the condition is not a reflection on their choice of spouse.
  2. Advise your child to keep his or her inherited money in a separate account. This account should be in his or her name only. Do not allow it to be used to support the family. Occasional, special use is less harmful than using the money regularly for support. Buying a house in joint names with the money is not helpful. In fact, even if the house is in the name of your child alone, but the family lives in the house, it will not be protected.
  3. If your child dies prematurely, his or her surviving spouse is likely to marry again and use your money for the benefit of a new family. Your child needs an up-to-date estate plan with properly drafted trusts which ensures their assets will pass only to their children and cannot be used by a surviving spouse for a second family.
  4. Use a trust to leave an inheritance to your children.

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