Parents who give away a bride or groom may have to give away a lot more if the newlyweds don’t live happily ever after. Family fortunes can unravel because of a divorce, death of a child, a lawsuit or trouble with creditors.

In some states, property gifted or inherited during a marriage is subject to equitable distribution upon divorce. Some states provide a spousal right of election, regardless of the provisions in a deceased spouse’s will. For example, under New York law, a surviving spouse is entitled to receive one-third of a deceased spouse’s estate.

“If you read Jane Austen novels, property issues and marriage have gone together for a long time,” says Ronnie Ringel, a managing director and trust counsel at New York City-based Fiduciary Trust Company International, which has roughly $16 billion in assets under management. Ringel, who has more than 25 years’ experience working with trusts and estates, sees parents becoming increasingly concerned about their children throughout the children’s lives.

“They want to do the best for them at any age,” she says. “People aren’t so secure that their children will be in a better place than they were.”

 To help protect wealth and keep it in the family, Ringel suggests that parents:

• Review wills and testamentary provisions of revocable trusts, and consider putting money in trust for a child rather than giving it outright.

• Review beneficiary designations on IRAs, pension plans and life insurance, and consider bequeathing these assets to a trust.

 • Give the newlyweds an intra-family loan to buy a home rather than providing the down payment or buying the home for them. If the couple divorces, each party will be responsible for paying back the mortgage. She says advisors should get familiar with intra-family loans, which at a minimum charge applicable federal rates prescribed by the Internal Revenue Service.

• Consider leaving the assets in any trusts for which they are the beneficiaries––provided they have power of appointment––in a trust for their children.
Parents can use trusts to change their wills in a very quiet way, which can help avoid bad feelings, Ringel says. She feels it’s better to use trusts for all children in a family rather than singling out black sheep, and emphasizes that a trust must be flexible to be effective.  “The trust isn’t really a trap,” she says.
“It’s a tent of asset protection.”

A Ringel client whose two children had weddings planned this summer sought help arranging her assets so she could continue to help them financially after her death. The client put her money in trusts for her children. Another trust she is a beneficiary of with power of appointment has assets that will pass to her children in trusts. But she plans to leave her IRA outright to her children upon her death, partly to express her confidence in them, Ringel says.

Ringel encourages advisors to be aware of what is going on in clients’ lives. If clients say their children are getting married, the advisor should first congratulate them but then dig a little deeper and explain what could happen under different circumstances. Suggest looking at their planning with a lead-in like, “Everyone’s rooting for a good marriage, but let’s talk about it,” she says.

 “No one wants to see their kids get divorced, but you don’t want to see them get divorced and lose all their money,” Ringel says.