Going through a divorce is never easy, but it is particularly complicated when you have significant assets. High asset divorces often become incredibly contentious and can result in lingering bitterness between exes that lasts for years.
In the wake of your divorce, you may worry about how to create a legacy that protects your children without potentially giving your ex access to your wealth if you die unexpectedly. You probably already removed your ex from your will. Creating a trust is the perfect solution for someone who wants to provide assets for their children while limiting the control that their former spouse will have over said assets.
A trust provides more protection for your children if you pass away while they are young
If something happens to you before your children turn 18, any amount of inheritance they receive will likely go directly to your ex. While some people respect the inheritance of their children, other people will use those assets for their personal gain or pleasure, leaving little or nothing for the children when they become adults.
A trust helps protect the assets you leave behind and ensure that your children are the ones that benefit from those assets. The structure of a trust allows you to place limitations on how much can be withdrawn, what assets can be used for, or how old someone has to be before they can access the funds. You could create a trust that will simply hold the funds for the children until they become adults.
You could also create a trust that will allow for small, scheduled withdrawals to cover costs ranging from medical care to education. A trustee oversees the trust and helps ensure that any withdrawal complies with the terms that you set up, thereby protecting your legacy and the assets you intend to your children to inherit.
You may want someone from your side of the family named trustee
One of the most complicated parts of creating a trust is the process of naming a trustee. First, you have to think of someone whom you trust to behave in an ethical manner with your children's inheritance. Second, you have to secure that person's permission to name them as a trustee in your estate plan.
Although it is common to compensate a trustee for their work, it is often a thankless job. Some people may decline your request. Your siblings, close friends or even nieces and nephews maybe good options for trustees. Naming your ex as trustee effectively gives them control over the assets, although they should only use them for the benefit of your children.
However, there will be very little direct oversight of how the trustee manages those funds. Unless your children invoke their legal rights against their parent, the chances are good that a trustee parent could dissipate a significant amount of a trust's assets.
There are many considerations when creating a trust. However, for divorced parents who want to leave behind assets to provide for their children, a trust can be an excellent solution.