I want to give over $600,000 to my adult children. How do I ensure they don’t lose that money in the event they divorce?

I don’t need the money. I have a good pension and my own property, so I would like to use these proceeds to set my children on the property ladder, in effect transmitting to them a portion of their future inheritance when they most need it. They are both renters but are keen to buy, and they are both married or partnered. 

My question is how to protect myself and them. If my spouse dies before me, I would want to move back to the U.S., near one child or the other, and this might require a top-up of capital — or else my children might have to provide me with a spare room or two. In addition, I would like to ensure that they could keep this gift for themselves in the event of divorce, without my being too obvious and nasty about it. Is there a co-purchase scenario — or two, since I want to treat them equally — that would make sense?    

The Father

Related: Trusts are useful for almost everything in estate planning

Dear Father,

If there is a 50/50 chance that you will return to the U.S., think twice before giving all $667,000 away to your children. Once you’ve given it away, it’s gone for good. 

First, the financials. The current estate-tax exemption — the amount of money on which you won’t owe federal estate tax when you die — is now $12.9 million for individuals, up from $12.06 million in 2022. That exemption is $25.84 million for couples, up from $24.12 million the previous year. However, those rates will sunset at the end of 2025. Without congressional action, those exemptions will return to where they were before the 2018 Tax Cuts and Jobs Act, meaning they will be reduced by about half.

An inheritance received by one person in a marriage is generally considered separate property, as is real estate owned by one spouse prior to a marriage. But that can change. Here’s Scenario No. 1: You make a gift of money to your unmarried child, who buys a home before getting married, but your child’s partner contributes to a renovation of the property, thus turning it from separate property into community property. And Scenario No. 2: You give money to your married child, who decides to put it in a joint bank account, thereby making it a shared asset. 

You could, as you suggest, purchase property with your children. There are several kinds of co-ownership agreements. Joint tenancy with the right of survivorship means that if one person died, the other owner or owners would inherit their share and the property would not go through probate. With tenants in common, on the other hand, if one of your children died before you, their share would go through probate and be distributed among their heirs. Such decisions should be made with the assistance of a good estate-planning lawyer.

There are measures you can take to keep this money in the sole hands of your children, but there is only so much you can do once you hand it over. Setting up a revocable trust for your children would allow you to dictate how the money is spent and who can access it, and would also keep it out of reach of their respective partners — should that be their wish, too. An irrevocable trust, used if your estate exceeds the lifetime exemption, is more often used by the ultrawealthy (exhibit A: the British royal family) and, from what you say, that does not apply to you. 

Remember to review your last will and testament and the rules of any family trusts every five years. There may come a time where you grow close to your children’s partners and wish to include them in your will, when you want to set up trusts for their children. Fair warning: Management of such trusts does not usually come cheap.

Ultimately, there is only so much control you can have over your children — and the money you give them. If you want more control, keep all or a portion of it. And never give away your entire kingdom.

Readers write to me with all sorts of dilemmas. 

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The Moneyist regrets he cannot reply to questions individually.

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