Divorce and Kids – Asset Management Failure Despite Guardianship by an Ex-Spouse
Author: John Holliman, JD
Divorce and kids can be a heartbreaking combination, particularly when the birth parent survives the death of an estranged spouse, or when blended family issues arise as a result of the remarriage of one of the ex-spouses.
Children of divorced parents need asset management controls put into place to protect them and their future. A divorcing parent may have the best intentions for the children of the divorce. But, many parents fail to develop an asset management program for those children. Many such parents have fewer assets after a divorce. Because of that, they fail to realize the need for asset management. Here is where an estate planning lawyer can be quite effective. An estate planning lawyer can explore the potential for asset management in the future and help close the asset exposure loopholes. This is what we call an asset protection state of mind.
No Asset Management State of Mind in this Instance
Here is what happened to two such children of divorced parents. Karen and John were married for five years, during which time they had two children, Nathan and Sarah. When they divorced, one of Karen’s primary complaints was that John was irresponsible with money. She said he always put the family in debt by buying big-ticket items they couldn’t afford. For a decade after the divorce, Karen worked hard at two jobs, scrimping and saving, so that Nathan and Sarah could have a solid college education and a good head start thereafter. She thought she had ticked all the right boxes at the time of divorce, including changing her will to leave her money and other assets to her children. When she unexpectedly passed away, she thought her then 12- and 14-year-old kids were well provided for. But over the next four years, John squandered all of the money she had left to Nathan and Sarah. When college time arrived, the till was empty. Karen had the best intentions, but she did not take into account the fact that John would become her children’s guardian if she died before they turned 18. As their guardian, he had control over how their money was spent.
Children of Divorced Parents Can be Protected
This did not have to happen. If Karen had sought our counsel, as attorneys who handle estate planning for children, we would have translated her circumstances and desires into legal actions to protect her kids. She would have learned of many options at her disposal to make sure the assets her children inherited were protected from John’s irresponsible behavior.
Trust Planning to the Rescue
Asset protection could have extended to her creditors and others who may lay claim to her estate assets. For example, Karen could have created a trust for her minor children, named a successor trustee other than John, and dictated instructions that insured the money she left to her children of divorced parents would not pass through their birth father’s hands. In particular, she could have instructed that the trustee use the funds only for specific purposes that benefit the children, and stated that the funds must be paid directly to certain designated institutions, such as universities or hospitals, rather than to their guardian directly. This would have protected all of the assets she left Nathan and Sarah until they were of age and could make their own decisions.
Like in so many such heartbreaking circumstances, the mother of the children of divorced parents had the best intentions but failed to understand that asset protection could have fulfilled her intention to better her children’s lives. Parents must develop an asset protection state-of-mind for their children. In order to do this in today’s world of legal technicalities, creditor predators, and a family legal system that is sometimes unpredictable, you need the advice of experienced estate planning lawyers such as John Holliman and Melanie B. Holliman. Call us today at (205) 663-0281 for a free consultation. To learn more about asset management, click here Asset Protection
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