Want Your Kids to Inherit? You Need an Asset Protection Plan
You've worked hard for your wealth. Don't let it fall into the wrong hands. Consider prenups, trusts and other protections to safeguard your family legacy.

Asset protection is an important concern for many families. Fortunately, parents have many options when planning to protect assets for their adult children.
Prenuptial agreements
A prenuptial agreement, or premarital agreement (a “prenup”), is a legally binding contract signed before marriage detailing how assets, debts, spousal support, pet custody, alimony, gifts and inheritances will be handled in the event of divorce or death. It is important to note that child support, child custody and visitation are typically not addressed in a prenup. Laying out clear guidelines for property division allows an adult child to protect their financial interests in family assets, as well as their own assets earned independently before the marriage, and prevent unnecessary complications during a divorce.
When a prenup is contemplated, it’s best to start working on it at least six months before the wedding, or earlier if possible. Some states may have time periods before a wedding when a prenup must be signed in order to be valid. However, even if your state does not have a time requirement, normal wedding-related stress as the wedding date approaches can add to the stress of a prenup. So, the sooner the better in terms of beginning the prenup process.
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In order for a prenup to be valid, both parties should have their own lawyer, and they must make a complete disclosure of their assets and liabilities. Other important requirements for prenups include that each party is freely entering into the agreement, there is no fraud and neither party is under duress (such as being forced to sign the agreement). Many states impose other requirements. It’s best to consult a lawyer who specializes in prenup agreements in your state so that all of the requirements are followed. That way the agreement will be upheld in the future if either party seeks to enforce it.
Scenarios when a prenup may be a good idea include:
- One party is significantly wealthier than the other.
- Second marriage/blended family situations (to ensure children from a prior marriage are protected financially).
- One or both parties have business interests they wish to remain separate (either because it’s a family business or their own, and the business needs to be protected in the event of a divorce).
Postnuptial agreements
If there is not enough time to sign a prenuptial agreement prior to the marriage, or if one was not contemplated but is now desired, another option is a postnuptial agreement (a “postnup”). Postnups allow spouses, after marriage, to contractually agree to terms outlining the equitable distribution of their financial assets in the event of a divorce or death. The parties can iron out the same financial considerations mentioned above in a prenup.
It is important to note that the wedding date gives the prenuptial agreement a deadline. No such deadline exists with a postnuptial agreement. In addition, parties to a postnup are being asked to give up rights they already have.
Leaving inheritances in trust
It’s important to remember that you have control over your own estate plan and how your children will inherit your assets.
Consider creating revocable trusts that establish discretionary, lifetime continuing trusts for the benefit of your descendants when you and your spouse, if any, are deceased. These types of lifetime continuing trusts — as opposed to outright distributions where your children will have complete control over the assets, or even staged distributions over time at certain ages in the future — ensure that assets can be managed for the benefit of your descendants and are protected from creditors. In many states these creditors include ex-spouses in the event of divorce.
Appointing a disinterested trustee (someone other than your child) to manage these assets adds another layer of protection. In addition, there may be estate and transfer tax benefits to leaving assets in continuing trusts for future generations.
Irrevocable trusts for children and grandchildren
You can also establish irrevocable trusts during your life for the benefit of your children and more remote descendants. These can also be discretionary lifetime trusts managed by a disinterested trustee, which will offer creditor protection to the beneficiaries. Because these trusts are irrevocable, they either cannot be changed, or they are difficult to change.
You can make gifts to these trusts during your life as appropriate in conjunction with your estate plan. The trust can make distributions for any reason within the discretion of the trustee, or for more specific purposes, such as for education, the care and comfort of children or medical expenses. Trusts can limit distributions made to current or future spouses, or you can include them if you wish.
Conclusion
An important part of any estate plan is to consider asset protection for the people who will be inheriting. Asset protection can be achieved in a variety of ways if it is a desired goal. Finally, it’s important to talk to your children about their inheritances, how you are structuring them and why. While these conversations can be difficult, they will make it easier in the future if difficult times arise, as they inevitably do.
We encourage you to reach out to your estate planning attorney or wealth planner to see how you can best protect your family and your wealth.
Tracy A. Craig is a partner and chair of Seder & Chandler's Trusts and Estates Group. She focuses her practice on estate planning, estate administration, prenuptial agreements, guardianships and conservatorships, elder law and charitable giving. She works with individuals in all areas of estate and gift tax planning, from testamentary estate planning and business succession planning to sophisticated lifetime leveraged gifting techniques, such as grantor retained annuity trusts (GRATs), intentionally defective grantor trusts, family limited liability companies and qualified personal residence trusts (QPRTs). Tracy serves in various fiduciary capacities, including trustee and personal representative (formerly known as executor). She also works with clients on issues facing elders.
Emily Parker Beekman is a Wealth Planning Strategist at Corient in Boston. She works with clients and their advisors to develop and implement their estate planning, wealth transfer and charitable planning strategies. Prior to entering the wealth management field, Emily spent 10 years as a practicing trusts and estates attorney, where she assisted clients and generations of families regarding estate planning, estate and gift taxes, probate law, probate avoidance, estate and trust administration, philanthropy and specialized in estate planning for disabled persons, guardianship and conservatorship matters and long-term-care planning and other elder law matters.
Related Content
- An 'Equal' Inheritance for All the Kids Doesn't Always Work
- In a Divorce, What Is Marital Property vs. Separate Property?
- Three Reasons a Prenup (or a Postnup) Is a Must-Have
- Four ‘Hidden’ Assets You’ll Need to Account for in Divorce
- Want to Give Money to Your Adult Children? 10 Things You Should Know
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Tracy A. Craig is a partner and chair of Seder & Chandler's Trusts and Estates Group. She focuses her practice on estate planning, estate administration, prenuptial agreements, guardianships and conservatorships, elder law and charitable giving. She works with individuals in all areas of estate and gift tax planning, from testamentary estate planning and business succession planning to sophisticated lifetime leveraged gifting techniques, such as grantor retained annuity trusts (GRATs), intentionally defective grantor trusts, family limited liability companies and qualified personal residence trusts (QPRTs). Tracy serves in various fiduciary capacities, including trustee and personal representative (formerly known as executor). She also works with clients on issues facing elders.
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