Q. I’m getting divorced and I’m concerned that the mediator is harassing me. I’m 54 and my parents are in my 80s. I’d get an inheritance of about $ 2.5 million if they died. I know my ex-wife is not entitled to an equitable distribution of the inheritance, but I have been told that the “income” that the inheritance is spinning off can be used in determining alimony at this point. The mediator says I have to raise more money now to avoid that. I know that in due course I can put the assets in a trust and have the trust pay the taxes and avoid the receipts on my tax return if I have to, but I don’t want to plan anything I don’t have to.
– Looking for fairness
A. There are a few steps your parents can take to help you.
But first of all you are right that as long as you do not consolidate any inherited funds in a joint account, the assets are protected from fair distribution in the event of a divorce.
If you had already inherited the funds and the income was used to support your spouse, the funds may be maintenance, said Jerry Lynch, certified financial planner at JFL Total Wealth Management in Boonton.
“Have your parents set up an escrow account using the terms ‘health, alimony, and support’ which are pretty broad,” he said. “These funds are safe from creditors if you are sued, and you can tell the trustee that you don’t need any money so there will be no distributions if you think a divorce is imminent.”
You can keep it in a separate account and set it up so that there are no distributions, he said. Even if some payouts come out, the alimony impact should be minimal, since you have not received any income to support yourself and your spouse in a long time, he said
“I like trusts because they keep things simple and keep people from messing things up,” he said. “What I mean is that most people don’t keep assets segregated and lose that protection. They buy a house and jointly title it, which makes it a marital asset. You put the money in a joint investment account and turn it into a marital asset. “
Even if you keep the assets segregated, there is often pressure to pool the funds, Lynch said.
“The conversation goes like this. “Why do we have our assets and you have a separate account with your assets? Why aren’t all of our things combined? ”Lynch said. “When a trust is used, the answer is simple, ‘This is how my parents set it up and I have no control over it.’
It avoids the hassle and protects the assets as it is not “your” money but money in a trust, he said.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
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