WHEN MOTHER'S LARGE GIFT TO HER SON PRECIPITATED HIS DIVORCE

A man who is a realtor by profession ... and board member of one of the charitable causes that we represent, told me this story of a family friend who decided she would give her son the amount that is exempt from estate tax ... $600,000.

It seems that she had some rapidly growing stocks and thought, correctly, that it would be wise to move as much as possible out of her taxable estate so that the growth would transpire inside her son's estate. And someone had told her, again correctly, that she could use her lifetime exemption of $600,000 during life.

After several discussions with her financial advisor and with her family over a period of months, she decided to make the gift. She gave her son $600,000.

The day after the gift was consummated, her daughter-in-law filed for divorce ... and, as you would suspect, received half of the gift. The daughter-in-law received $300,000 by order of the divorce court.

Could the family have achieved its goals in a way that would protect the son from such a loss?

Certainly!

Mother could have created a trust, A Protect Assets for Kids Trust, and stated in that trust that "only my issue" will benefit from this trust. In that case, her son would benefit from the trust. The trustee, preferably a bank or stockbrokerage trust department, would be the legal owner of the asset; but, the son would be the equitable owner.

Such a trust would have protected the gift from a divorce action.