Reply to How to Keep Inheritance Separate

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[quote=Anonymous]1. Put into 529s that a trusted family member owns making your kids the benefactor. Then they can’t be persuaded to withdraw and give to dh, another potential stepmother, or step siblings. If not used for education it can be rolled into Ira or used for other qualifying purpose.

2. Create a trust, and name a custodian who you know will not be persuaded to go against your wishes. 
To protect a child's money, the most effective method is to place the assets in a trust managed by a neutral, third-party trustee
. This prevents the parents from having direct access to or control over the funds. Other strategies include structuring the financial guardianship in a will and using specific account types, especially when the child is a minor. 
Using a trust
A trust is a legal arrangement where a trustee holds and manages assets for the benefit of a beneficiary, in this case, the child. 
* Neutral trustee: The trust can be managed by an independent third party, such as a professional fiduciary, a trust company, or a trusted family member who is not the parent. The trustee follows your specific instructions for how and when the money can be used.
* Lifetime asset protection trust: This type of trust holds the child's inheritance in a protective trust for their lifetime. It can protect the money from a parent's legal troubles, bankruptcy, or misuse.
* Discretionary trust: This trust gives the trustee complete control over how the assets are distributed to the beneficiary. The trustee can release funds for specific purposes, like education or medical care, without giving the parent unrestricted access.
* Testamentary trust: A testamentary trust is created through a will and only comes into existence upon your death. It allows you to specify the terms for managing assets for your child and name a specific trustee. [/quote]

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