In a recent case, a Texas man inherited $400,000 in cash from his aunt. The man’s ex-wife went to court and claimed that as a result, his child support payments should be increased.
The Texas Court of Appeals agreed with the ex-wife. It said that even though the $400,000 wasn’t wages or earnings, it was still a “resource” that had to be considered in determining how much the father had to pay for his two children.
Now, we don’t know what the aunt’s feelings were. It’s entirely possible that she was happy to use her money to take care of her nephew’s children. However, she probably never considered that after her death, a large portion of her assets would end up under the direct control of her nephew’s ex-wife.
It’s a good bet that the aunt might have been happier if she had put the $400,000 into a trust that would benefit the nephew and his children. In that way, she would have had control over how the money was spent for their benefit - rather than the ex-wife.
In addition, the nephew wouldn’t have had to go to court to fight over who got the money.
Trusts can be an excellent way to protect assets if you’re considering leaving an inheritance to someone who might otherwise lose the property for any number of reasons, including divorce, lawsuits, business problems, addiction, or simply a lack of investment acumen.