Keeping In-Laws Out of the Family Estate

When a child falls in love and plans to get married, the child’s parents may not share the love—or want to share their wealth. A prenuptial agreement is one way to keep an in-law out of the family estate, but suggesting a prenup to a soon-to-be-married child can cause hurt feelings. Creating a trust may be a better option.

A simple irrevocable trust may do the trick. Make sure that the trust agreement states that marital funds are not to be used to support the trust in any way. If marital funds are used, the trust itself can become marital property, defeating its purpose.

A second option is a preservation trust. Parents may convince a child to put certain assets in a trust and name a beneficiary other than his or her prospective spouse. The prospective spouse doesn’t have to give approval and may not find out about it for a long time.

See Arden Dale, Shielding an Estate From Unloved In-Laws, Financial Adviser, Sept. 30, 2010.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.