- Candace E. Duecker, CFP®, CDFA®
Protecting Your Children's Assets
Minors are generally observed to lack the capacity required to enter into contracts; therefore, it is not uncommon for a parent or legal guardian to help a child acquire property until they are able to do so independently. The more common assets that tend to fall into this scenario include:
Financial accounts, such as bank and brokerage
College savings accounts
It is easy to assume that what has been opened/acquired in a parent's name but merely set aside and understood to be for the benefit of children will remain that way after the divorce has been finalized. The truth is, that it is not always the case when left to assumptions and absent proper legal support. Imagine you set up a 529 account for your child/ren during your marriage in which your ex-spouse remains the custodian post-divorce. Your ex-spouse later remarries and begins to build a new family. As custodian of the 529, they decide to change the beneficiaries of the account to support the college funding goals for their new family only to leave you to figure things out for the child/ren you shared together. You can probably see where we're going with this - financial accounts could be withdrawn or liquidated, vehicles could be sold, etc.
It is important to note that some accounts are inherently more protected, such as those titled in trust and/or UTMA (Uniform Transfers to Minors Act) as there is a fiduciary standard that must be met. However, in general, it is just not enough to assume an ex-spouse wouldn't sacrifice the relationship with their child/ren for personal financial gain. Too often, I see the topic of child/ren's assets not get the attention it deserves; therefore, any time I am working with a client who is designating assets for their child/ren, we are sure to address this comprehensively with their attorney to increase the chances of avoiding a worst case scenario. Every situation is unique, so you'll want to talk with your attorney to determine the best way to protect your child/ren's assets in your divorce. Your attorney should be able to recommend the proper framework needed for each type of asset and they will be able to draft the language necessary to make it most effective.
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