Protecting Your Child's Inheritance from Their Spouse: What Every Parent Should Know

As a Portland, Oregon estate attorney, one of the most common concerns I hear from parents is surprisingly consistent: "How can I make sure my son-in-law or daughter-in-law doesn't walk away with my child's inheritance if they get divorced?"

It's a delicate subject. While we all hope our children's marriages last forever, divorce statistics make this a legitimate planning concern. Even in happy marriages, parents often want to ensure their hard-earned assets remain within their descendants and benefit their grandchildren, not a future ex-spouse.

The Problem with Direct Inheritance

When you leave assets directly to your child through a will or as a beneficiary designation, those assets typically become their property. In many states, anything acquired during marriage—even inheritances—can become vulnerable during divorce proceedings or subject to creditor claims.

Even if your child keeps inherited assets separate, they can become commingled through simple actions like depositing inheritance funds into a joint account or using the money to pay off marital debt. Once commingled, the assets may lose their protected status.

How a Properly Structured Trust Provides Protection

As a Portland, Oregon estate attorney, I often recommend a specific solution: establishing a discretionary trust for your child's benefit. Here's how it works:

1. Create a Separate Trust for Each Child

Rather than leaving assets outright to your children, you establish a trust for each child's benefit. Your child can serve as a co-trustee alongside another trusted individual or institution, or as the sole trustee with specific limitations.

2. Maintain Separation of Assets

Assets in the trust technically belong to the trust, not your child personally. Since your child doesn't "own" these assets, they generally cannot be considered marital property subject to division in divorce.

3. Establish Distribution Standards

The trust can specify when distributions should be made. For example, you might authorize distributions for education, healthcare, starting a business, or purchasing a home. You can also include provisions for your grandchildren's benefit.

Additional Benefits Beyond Divorce Protection

A properly structured trust doesn't just protect against divorce, but it provides multiple layers of protection:

• Creditor Protection: Assets in the trust are generally protected from creditors, lawsuits, and bankruptcies.

• Spendthrift Protection: If your child struggles with money management, the trust can prevent rapid depletion of their inheritance.

• Tax Planning: Certain trusts can provide significant tax advantages over direct inheritance.

• Special Needs Planning: If your child has special needs, the trust can provide financial support without disqualifying them from government benefits.

Finding the Right Balance

The key to successful trust planning is finding the right balance between protection and flexibility. Working with an experienced Portland, Oregon estate attorney ensures your trust provides appropriate protections while still giving your child reasonable access to their inheritance.

Unlike overly restrictive trusts that can cause family resentment, a well-drafted trust respects your child's autonomy while implementing sensible safeguards for their long-term financial security.

Taking the First Step

Protecting your child's inheritance requires thoughtful planning with professional guidance. Every family's situation is unique, and trust provisions should be customized to address your specific concerns and goals.

Our experienced Portladn, Oregon estate attorneys can help you navigate these options and create a comprehensive plan that protects your legacy for generations to come and ensures that your hard-earned assets benefit those you love most.

If you’re ready to get started, simply contact our office at (503) 235-5150 to schedule a consultation with an experienced Portland, Oregon estate attorney who can help you design a plan tailored to your family's unique needs.

If you want to get started on your estate plan, read about our estate planning services and schedule an appointment.

To your family's health + happiness.

~Candice N. Aiston