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Safe Intergenerational Wealth Transfer

Transferring wealth to heirs is about more than taxes. Without intentional design, assets can be lost to your family through divorce, remarriage and creditor claims. A safe intergenerational wealth transfer strategy helps ensure that what you build stays within your lineage. 

It’s essential to explore some of the key tools — ownership structures, trusts, marital agreements and ongoing maintenance — that can minimize the loss of wealth to unintended people.

As you read on, consider which legal and financial professionals you should discuss these wealth protection tools with as you establish and structure them. Also ask them what else you might need for your specific situation.


Use Protected Trusts Instead of Outright Inheritances

Direct bequests — even to children — are vulnerable to a range of threats, including a beneficiary's divorce, creditor judgments, lawsuits, or poor financial decisions. A family trust properly structured by your estate planning attorney based on your state’s law can bypass probate and protect assets in some distinct ways from situations like these.1

Your family trust can be revocable,1 which means you, as grantor2 or maker of the trust, can make changes during your lifetime while maintaining control of the assets. Or it can be irrevocable, which means once formed, you cannot amend the trust or transfer property back out of it.1

But irrevocable trusts3 can provide strong asset protection when properly structured, primarily because you, if you are grantor, give up ownership and control of the assets. Unlike revocable trusts, these trusts cannot be amended or revoked after formation. 

For maximum protection, an independent trustee — rather than the grantor — should control both asset management and distributions to beneficiaries. This separation of control is what provides the enhanced asset protection that irrevocable trusts are known for.3

Choose your trustees carefully, making sure they’re financially responsible, trustworthy and can manage the trust effectively.4 Also ensure they know your wishes and sign documents accepting the role. If you make major changes to your trust documents, inform them. Some state laws require that.

Here are some fundamental protective features, distribution strategies and maintenance tactics that work in most situations when trust assets get distributed to beneficiaries.2


Add Essential Trust Protection Features

One key provision you should consider is the spendthrift provision,5 which protects your estate's assets from irresponsible spending and prevents beneficiaries from transferring their interest to unintended parties. It can also shield assets in a revocable trust from the creditors of the deceased once trusts become irrevocable at death.2 

Another provision to consider is a discretionary distribution clause,3 which gives trustees control over distributions. For maximum protection, consider appointing an independent trustee to make distribution decisions.

Unlike assets owned outright, trust assets are not held in a beneficiary's name but in the trust’s — and the spendthrift provision and discretionary distribution clause can provide enhanced protection from creditors and divorcing spouses.

Consult your attorney about additional trust provisions that can protect assets from both beneficiary behavior and external claims, helping keep your wealth in your family.


Plan Asset Distribution Strategically

Trust distributions can be carefully structured to match your long-term goals. Moreover, trusts can be designed for staged distributions6 to your heirs over time (for example, at ages 25, 30, or 35) or for specific purposes like educational expenses, medical needs, or living expenses.4

That layer of control can prevent impulsive withdrawals by beneficiaries who have to get trustee permission for them or premature trust asset depletion.


Practice Long-Term Trust Management

A properly constructed family trust based on appropriate state law also allows you to name successor trustees6 to provide flexibility in changing circumstances — even across generations.

Because the trust structure lives beyond you, it can preserve continuity and guard against asset dilution through remarriage or future litigation.

However, your specific family structure may require additional protective measures to safeguard wealth transfer effectively.


Protect Assets for Minor Children

The first step in safe intergenerational wealth transfer is protecting assets for your minor children,7 which requires careful consideration beyond basic wills. Without specific planning, assets typically pass directly to your surviving spouse, giving them full control over if, when and how your children ultimately receive those assets. This may not align with your wishes for your children's financial future.

Pie chart with dollar sign icon
Build the right trust and estate structure so your assets stay in your family — shielded from divorce, creditors and errant heirs.

Creating a trust or adding specific provisions to our family trust lets you specify how and when assets are distributed, while naming a separate trustee ensures proper oversight. You can structure distributions based on age milestones (like portions at 25, 30, and 35) or restrict usage to specific purposes like education and healthcare.

UGMA/UTMA custodial accounts offer a simpler alternative but transfer full control to children at age 18-21 (depending on state law). They also lack the protections a trust provides against creditors or divorce settlements.

Consider naming both a guardian for your children's care and a separate trustee to manage their financial interests. This separation of roles helps prevent conflicts and ensures proper management of the assets designated for your children's benefit.

You may also name a successor guardian or trustee in case your spouse remarries or becomes incapacitated. That document-level clarity helps prevent legal battles over access to the funds or distributions to unintended others, especially outside your family line.


Use Marriage Contracts to Safeguard Assets

Marriage and remarriage pose one of the largest risks to your intended legacy. A surviving spouse or new partner could gain control over family assets unless you explicitly establish legal shields against it.

A prenuptial agreement executed before marriage — or a postnuptial agreement executed afterward8 — can define what remains separate property, how inheritances and business interests are treated, and provide clarity on future income or growth. Enforceability varies by state and requires full disclosure, fairness and often independent counsel for each party, but they are standard tools in modern estate design. 

These agreements are especially important in second marriages, where you may want to protect your children from a prior relationship from being inadvertently disinherited. But be careful because a prenup or postnup is not a substitute for a will or trust. They work in tandem with each other.

When married, your estate plan should explicitly reference the prenuptial agreement, reaffirm separate property or asset statuses, and specify that certain assets or trusts remain off-limits in a divorce. That way, your intended wealth transfer doesn’t get derailed by marital claims.


Protect Your Estate From State Property Tax Laws

Your state's property laws affect asset division,9 regardless of your estate documents. Some states follow community property laws, where assets acquired during marriage belong equally to both spouses. Others allow couples to opt into community property treatment. And still others follow common law, a surviving spouse has rights to claim a portion10 of the estate (called an elective share), even if excluded from the will. This protection against disinheritance can affect plans for blended families.

To work within these rules while preserving your intended beneficiaries, talk to your legal professionals about using specific trusts like Qualified Terminable Interest Property (QTIP) trusts11 or credit shelter trusts.12 Properly structured, these tools can satisfy spousal rights while ensuring assets ultimately pass according to your wishes.


Avoid Blended-Family Pitfalls With Trusts That Protect Both Spouse and Children

Blended families introduce added complexity: A surviving spouse has no legal obligation to provide for stepchildren unless explicitly included in your estate plan.13 Standard estate plans that leave everything to a current spouse may unintentionally disinherit children from prior relationships.

A common solution is combining a Qualified Terminable Interest Property (QTIP) trust with a credit-shelter trust. The QTIP trust provides income to your surviving spouse while preserving the principal for your biological children. The credit-shelter trust can use your estate tax exemption early and maintain separate assets for your children, while still giving your spouse limited access.

Another approach is creating dual trusts: one for your spouse and another for your children, with carefully balanced terms. This structure prevents either spouse or stepchildren from redirecting or revoking the other's share.

Consider appointing an independent trustee or professional fiduciary rather than a family member to reduce potential conflicts and favoritism. Document clear decision-making powers, incapacity designations, and successor roles to maintain your intended plan as family dynamics shift.


Work with Your Team

Engage experienced advisors who know your state laws, including estate planners, a tax attorney or CPA, and a financial advisor. They should get to know you, your family and your goals —and should be able to help you test your assumptions and ensure alignment with your overall wealth plan, including transfer of assets to beneficiaries. 

With diligence in properly creating your inheritance protection structure and maintenance strategy, you have the best chance of honoring your intentions with your wealth, possibly for generations.

Important disclosure information

Asset allocation and diversifications do not ensure against loss. This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Rustin Diehl, “To Avoid Probate, Use Trusts for Estate Planning,” Kiplinger, March 5. Accessed December 12, 2025. Back
  2. CFPB, “What is a revocable living trust?,” May 14, 2024. Accessed December 12, 2025. Back
  3. Rustin Diehl, “With Irrevocable Trusts, It’s All About Who Has Control,” Kiplinger, April 28, 2024. Accessed December 12, 2025. Back
  4. Allen J. Faulke, “To Protect Your Kids, Consider These Estate Planning Steps,” Kiplinger, November 18, 2023. Accessed December 12, 2025. Back
  5. Donna LeValley, “15 Estate Planning Terms You Need to Know,” Kiplinger, April 30, 2025. Accessed December 12, 2025. Back
  6. Indrika Arnold, “Estate Planning? Four Strategies for Leaving Assets to Your Heirs,” Kiplinger, February 8, 2023. Accessed December 12, 2025. Back
  7. Alvina Lo, “Three Ways Parents Can Transfer Wealth to Help Their Kids,” Kiplinger, September 11, 2023. Accessed December 12, 2025. Back
  8. Nicole Fallon-Peek, “Prenuptial and Postnuptial Agreements: What Every Couple Should Know,” Investopedia, October 1, 2025. Accessed December 12, 2025. Back
  9. MP McQueen, “Marital Property: Common Law vs. Community States Explained,” Investopedia, September 27, 2025. Accessed December 12, 2025. Back
  10. Ashlea Ebeling, “The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart,” WSJ, June 12, 2024. Accessed December 12, 2025. Back
  11. Donna LaValley, “Is Your Estate at Risk? The Five Trusts You May Be Missing,” Kiplinger, September 1, 2025. Accessed December 12, 2025. Back
  12. James Chen, “Credit Shelter Trust (CST): What It Is, How It Works, Role in Estate Taxes,” February 22, 2025. Accessed December 12, 2025. Back
  13. John M. Goralka, “Comparing Estate Planning: ‘Leave It to Beaver’ vs. ‘Modern Family’,” Kiplinger, June 12, 2023. Accessed December 12, 2025. Back