23 Jun Your Estate Plan Protects Your Kids. Does It Protect Them From Their Spouse?
Most parents build their estate plan around one question: how do I get my assets to my children? The better question is: how do I keep those assets from leaving?
Half of marriages end in divorce. That number hasn’t moved much in decades. If you have two children, the odds that at least one of them will go through a divorce are roughly 75%. If you leave your assets outright, those assets become your child’s property. And your child’s property is one bad marriage away from becoming their ex-spouse’s property.
The Problem With Outright Inheritances
When your will or trust says “distribute equally to my children, outright and free of trust,” you’re handing your child a check with no guardrails. The moment those funds hit your child’s bank account, they are your child’s separate property in most states. But separate property is only protected if it stays separate.
Your child deposits the inheritance into a joint checking account. Separate property becomes marital property. Your child uses the inheritance to renovate the marital home. Separate property becomes marital property. Your child invests the inheritance in a brokerage account titled jointly with their spouse. Same result.
Most children don’t do this out of carelessness. They do it because they trust their spouse. And at the time, that trust is warranted. The problem is that estate plans need to survive the parts of life you can’t predict.
What a Lifetime Trust Actually Protects
The alternative to an outright distribution is a lifetime trust. Instead of handing your child a lump sum, you keep the assets inside a trust for your child’s benefit. Your child can still use the money. The trustee can pay for their home, their children’s education, their medical expenses, their lifestyle. But the assets remain titled in the name of the trust, not in the name of your child.
That distinction matters in a divorce. In most states, a divorcing spouse can only reach assets that belong to the other spouse. If the assets belong to a trust, and the trust is properly structured, the ex-spouse has no claim. The money is there for your child. It’s just not your child’s money, legally speaking.
Discretionary vs. Mandatory Distributions
Not all trusts offer the same protection. A trust that says “the trustee shall distribute all income to the beneficiary quarterly” gives the beneficiary a legal right to those payments. A divorcing spouse’s attorney can argue that those guaranteed income streams should be counted as marital income. In some states, courts agree.
A discretionary trust is different. It says the trustee “may” distribute income or principal for the beneficiary’s health, education, maintenance, and support. The key word is “may.” Because the beneficiary has no guaranteed right to any specific distribution, there’s nothing for the divorcing spouse to claim. The trustee can keep making distributions for your child’s benefit. But the ex-spouse can’t force those distributions or count them as marital property.
The difference between “shall” and “may” is one word in the trust document. In a divorce, it can mean the difference between keeping and losing half the inheritance.
The Trustee Decision Is a Protection Decision
Many parents name their child as sole trustee of their own trust. It simplifies things. Your child controls the money directly. No need to call a bank or a sibling for approval.
But naming your child as sole trustee of a trust designed to protect them from divorce creates a contradiction. If your child controls the trust and can distribute assets to themselves at will, a divorce court may treat those assets as effectively belonging to your child. The protection disappears.
The stronger approach is to name an independent co-trustee or a trust protector who has the authority to modify distribution provisions if your child’s marriage is in trouble. Some families name a corporate trustee. Others name a trusted family advisor. The point is to create genuine third-party discretion, not just the appearance of it.
Spendthrift Clauses Are Not Optional
A spendthrift clause prevents a beneficiary from pledging their trust interest as collateral and prevents creditors from reaching into the trust to satisfy the beneficiary’s debts. In a divorce context, it prevents the ex-spouse from attaching the trust assets directly.
Every trust designed to protect a child from divorce should include a spendthrift provision. Most well-drafted trusts already have one. But I’ve reviewed hundreds of trusts over the years, and a surprising number either omit it or include a version so narrow that it wouldn’t survive a challenge. If your trust was drafted from a template or by a general practitioner, check this provision specifically.
The Coordination Problem
Trust protection doesn’t work in isolation. It needs to coordinate with your child’s prenuptial agreement (if one exists), the family’s operating agreement (if the trust holds a business interest), and the beneficiary designation forms on life insurance and retirement accounts.
I’ve seen families with a perfectly drafted trust that still lost assets in a child’s divorce because the life insurance beneficiary designation named the child outright instead of naming the trust. The trust protected the trust assets. But the $2 million insurance payout went directly to the child, became commingled, and ended up on the table in divorce negotiations.
Every asset that’s supposed to be protected needs to flow through the protected structure. One missed beneficiary form, one account titled in the wrong name, and the gap in coverage is exactly where the claim lands.
Is Your Estate Plan Designed to Survive Your Children’s Marriages?
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