Inheritance Planning and the Divorce of a Child
Many estate-planners are facing a difficult dilemma these days. The rise in the divorce rate has
resulted in some interesting problems when it comes to the area of inheritance planning. Many
parents love their son’s or daughter’s spouse, but not so much that they want him or her to inherit
some of their hard-earned wealth when, subsequent to a divorce, they become their ex-son-in-
law or ex-daughter-in-law. So how are estate-planning attorneys getting around this
In Colorado, the divorce laws are providing some help. Those laws say that “marital property”
must be split equitably between the parties, but separate property, including an inheritance, is not
subject to equitable division. However, when the child receives the inheritance prior to the
divorce, any appreciation in the value of the inheritance – after it is received – IS marital
property. Therefore, the appreciated value is subject to equitable division upon divorce.
Ever tricky, attorneys are trying to use trusts as an end-run around this problem. But be warned,
in a 2001 case, Colorado’s Supreme Court held a wife had a vested interest in a trust when
named as beneficiary, and ANY appreciation in value was marital property. Instead of naming
your child as the beneficiary of the trust, designate someone else to be the beneficiary. That
person will then have wide discretion in distributing the trust assets to your child. Additionally,
in order to avoid having the trust defeated, designate your grandchildren to receive any of the
trust assets that still remain once your child dies.
Experienced estate planning attorneys Fayetteville AR of the Deborah Sexton Law Office PA
offers estate planning and business planning resources to residents of Fayetteville AR. To learn
more about these free resources, please visit http://www.arkansas-estateplanning.com today.