If you’re the parent of a young adult, it’s smart to talk to them about the value of a prenuptial agreement before they’re considering marriage. If you wait until they’ve found “the one,” bringing up this topic can make it appear as though you don’t believe in the future of the marriage and/or believe this person will try to get as much as possible in a future divorce.
If you’ve got accumulated assets that you plan for your child to inherit, it’s only reasonable that you want to protect them. A young person who knows only about their own assets, like a car and some furniture, may not know they have anything worth protecting in a prenup. That’s why they need to understand what will be theirs someday and the importance of keeping it in the family.
Even if you convince your child to get a prenup, their spouse-to-be needs to agree to it. They can’t be nagged or coerced (by your child or you) to sign one, or it won’t hold up in court. It also must be fair to them.
What is a DAPT?
If your child is marrying without a prenup, you can still protect their inheritance from divorce by putting it in the right kind of trust. Indiana is among the state that allow people to set up a domestic asset protection trust (DAPT). Each state has unique laws around DAPTs, so it’s crucial to understand how they work in Indiana.
A DAPT is an irrevocable trust that allows disbursements only by the trustee to the beneficiary. Since the beneficiary (for example, your child) doesn’t own the trust assets, they’re protected from property division in divorce as well as from creditors and judgments (for example, in lawsuits).
Other steps to protect inherited assets
Note that any other inheritance that you leave your child can also be protected in divorce as long as it is maintained as separate property. Once it’s commingled with marital assets, it becomes marital property that can be divided. The same applies to gifts.
Another possible protection of inherited assets is a postnuptial agreement. This can be drawn up any time after the marriage to stipulate the same kind of things a prenup would – including the handling of inherited and gifted assets – to provide added protection.
Understandably, most young people about to get married don’t want to think about these things. That’s why it may be necessary to use estate planning tools to protect your family’s assets in the future.