Keeping It in the Family:  Protecting Your Children's Inheritance in Divorce

           If you have more than one child, purely as a matter of statistics, there is a good chance at least one of them will go through a divorce.  Whether this issue is a present concern for you or still many years off, you may be interested in taking steps to ensure your children's inheritance stays with them and does not go to their former spouse.

            Generally, in Ohio, property inherited by a child is considered his or her separate property and not subject to division on divorce.  It is our experience that often

as time goes by, the inherited property can become commingled with the couple's martial property making it impossible to sort out the inherited property if the couple later divorces.

            One way to avoid this problem is to leave your children's inheritance in Trust throughout their lifetime, rather than distributing it to them outright.  Because the property is titled in the Trust's name, it cannot easily be blended with other marital property.  The trust should be "off the table" when property is divided upon divorce.

Further, the Trust should contain a "spendthrift" provision that prevents the beneficiary's creditors from forcing the Trustee to distribute property to the beneficiary to satisfy the creditors' claims.  These spendthrift provisions protect the inheritance in divorce and also protect it from other creditors.

            Your child will still benefit from distributions of Trust property throughout his or her lifetime using this kind of Trust.  In appropriate situations, your child can even serve as Trustee of his or her own Trust, controlling when and for what purpose distributions are made, while still maintaining the creditor protection of the Trust.

          We believe this type of planning can establish a valuable framework to help ensure your legacy stays in the family.