The Role Prenups Play in Protecting Family Wealth
Few things alarm parents more than the thought of family wealth ending up in the hands of a child’s ex-spouse. For many of our clients, this is a top concern with respect to estate planning and preserving generational family wealth.
Many parents believe a well-drafted and properly administered irrevocable trust will adequately protect family wealth. But this may no longer be enough. We’ve seen divorce courts increasingly consider inheritances and trust distributions when distributing marital property and entering orders for spousal or child support. For this reason, we regularly suggest using prenuptial or even postnuptial agreements as part of the family’s overall plan to preserve wealth.
The case for trusts
Historically, courts have not treated assets held in an irrevocable trust as marital property. Instead, the trusts’ assets have been treated as separate property, particularly when the beneficiary is not the trustee and distributions are not routine. When a trustee has complete control over whether to distribute funds, the beneficiary’s access is often considered uncertain.
The evolving landscape
Some recent court rulings reflect the reality that many “independent” trustees have close relations to the beneficiary (often, parents or siblings), and that distributions may indirectly support a spouse and children’s lifestyle. Courts may consider the size of a trust, the trustee’s relationship to the beneficiary and the pattern and purpose of distributions, and may scrutinize loans (loan vs. gift).
Given the way the legal landscape continues to evolve1, we advise clients to consider six key points in trust design: who the beneficiaries are; whether the child can direct distributions; whether assets ever pass outright (and when); whether the child serves as trustee; how discretionary distributions are; and when principal distributions occur. Because courts may consider trust assets and inheritance when issuing financial orders, a non-trust beneficiary spouse may receive a larger share of marital assets or additional support.
The path to protecting assets
Family courts have broad discretion, and outcomes are uncertain. That’s why we suggest discussing a prenup for any trust beneficiary, rather than relying on an irrevocable trust alone. While prenups are not inviolable, a well-drafted and properly executed prenup is likely to hold up with independent counsel, sufficient time and full financial disclosures (including any beneficial interest in trusts). Postnuptial agreements can fulfill the same role.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for
J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
1To be clear, the judicial trend is not universal. It is less pronounced in the community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), in which the default presumption is that divorcing spouses will divide community (a.k.a. marital) property 50-50. In other words, one spouse’s separate property may have no influence or bearing on how the marital estate is divided or how or how support orders are calculated.
Source: “The vital role prenups play in protecting family wealth,” Erika Shaw, matrimonial specialist, Jordan Sprechman, vice chairman, practice lead U.S. wealth advisory, March 11, 2026.
