Question:
Since we don’t have a lot of confidence in our daughter’s future husband, we’d like to make sure that she’s protected, as much as possible, when we’re gone.
We have a revocable trust now. Our daughter agrees to do a prenup but we’ve been told that an irrevocable trust is even better.
Do you think a prenup and the revocable trust is enough or should we also consider an irrevocable trust?
Response:
I would do both. You don’t need an irrevocable trust now, but I would recommend having your trust continue for your daughter’s benefit after you have both passed away. At that point, it would become irrevocable.
In our practice, we call these “family protection” trusts. There are some choices you can make on how it’s written and managed. These trusts are most protective if there’s an independent trustee who has full discretion regarding distributions to or for the benefit of the child or grandchildren.
But many clients don’t want the expense or control of an independent trustee. So our trusts typically say that the child can be the trustee to manage the investments and can withdraw the income – interest and dividends – as they come in, but that for distributions of principal they would need to appoint an independent trustee. If properly managed by the child, the trusts are still quite protective — but the child must honor the trust’s limitations.
Added benefits of these trusts is that they provide creditor protection in the event your daughter is ever sued for any reason or must file for bankruptcy and they can protect the funds from being raided by your future son-in-law should he want to spend it in ways your daughter doesn’t agree with.
