Protecting Your Inheritance

Jeff Lipton


This is a recent question I received which I thought I would post to the blog and forum:

Dear Jeff:

Q;

I have an inheritance of $400,000 coming to me and I also have some stocks, I am planning to marry soon and want to insure that this money is outside of the marital assets and that I can safely pass these assets to any future generations.
Samuel

A;

In regard to the $400,000 note that you should not try to hide the existence of the asset as that will involve an immediate element of distrust and in reality you would only be potentially perjuring yourself should you be discovered (in the legal sense of the word) in a subsequent litigious matter.

The use of either a declared asset protection trust or simple asset protection insurance, will allow for those assets (the inheritance and the stocks) to be placed into an asset protection structure. They would be in normal cases outside of the ability of a court of Family Law courts to attach if the they were irrevocably transferred (which would include taxes being paid) and declared and the structure resides in another jurisdiction.

Asset protection insurance is a superior vehicle to protect them as those assets would have had to have been irrevocably transferred into the policy for the benefit of beneficiaries and domestic courts could not attach these assets. The trust subjects itself to the risk of being what is termed a sham trust, and is not as flexible of a vehicle.

Lastly, family courts would in fact try to do an even up of existing assets that exist within your domestic jurisdiction. Meaning that if there were $400,000 plus asset value in a house or a business the split would not be 50-50 on these assets and the judge may attempt to compensate the other spouse from those assets. That said, the goal is protect the $400,000 plus for the benefit of beneficiaries and in this regard no extraterritorial decree from a judge can affect the disposition or use of the $400,000 plus assets.

Many a spouse in this position will name the other spouse a beneficiary of the policy, thus difficult to say that the spouse has been disenfranchised, and yet the critical rational for protecting these assets is to insure that the original beneficiaries which may the couple’s children and the spouse, receive these assets and that they are not tampered with or their course of use altered if the spouse remarries.

In many cases it’s more important to insure that those assets benefit the children and a subsequent marital event cannot alter their future use. If the other spouse is named as a beneficiary then it’s hard to argue that they have been disentitled-just the freedom for that spouse to choose has been limited and there may be some minimal even up on existing other assets.

This works, we have deployed asset protection insurance and like scenarios to protect family assets.