How to Protect Your Children’s Inheritance in Hawaiʻi from Divorce, Lawsuits, and Taxes

If you already have an estate plan, chances are it gives your children their inheritance outright — sometimes in smaller stages at 25 and 30. At first glance, that may seem fine. But if your plan distributes everything outright, you may be unintentionally overlooking one of the most valuable gifts you can leave your children: lasting protection.

And if you don’t yet have an estate plan, but you live in Honolulu or elsewhere in Hawaiʻi and want to protect your children or loved ones, now is the time to get started.

Why Outright Inheritances Leave Your ʻOhana at Risk

An outright inheritance is vulnerable to divorce, lawsuits, creditors, and even estate taxes. Once money or property is distributed directly, it’s no longer protected — and once lost, it cannot be recovered.

Instead, imagine leaving your children a nest egg that can survive divorce, car accidents, failed business ventures, or other lawsuits. That’s exactly what a Lifetime Asset Protection Trust can do.

Protecting Against Divorce and Lawsuits

Even if you believe your children won’t face lawsuits, divorce is one of the most common ways inheritances are lost. A Lifetime Asset Protection Trust can shield what you leave behind from divorce proceedings — ensuring it stays in your family, no matter what.

Similarly, if your child is sued — say, after a car accident or a business deal gone wrong — assets inside a protected trust remain out of reach from creditors and claimants.

Saving Your Family From Estate Taxes

Here in the U.S., the federal estate tax is currently 40% on every dollar above the exemption threshold. That means if your child has a taxable estate when they pass, as much as 40 cents on every dollar you left them could go to the government instead of your grandchildren.

With smart planning, including a Lifetime Asset Protection Trust, you can preserve more of your wealth for future generations instead of watching it disappear in taxes.

Giving Your Children Control — Without Sacrificing Protection

One common concern parents have is: “Will my kids actually be able to use what I leave them?”

The answer is yes. With a Lifetime Asset Protection Trust, your children can eventually serve as the Trustee of their own trust, giving them control over investments and distributions. You decide when they’re mature enough to take the reins, and they still receive the protection of the trust structure.

Is This Still Important If You Don’t Have Much?

Even modest inheritances benefit from protection. In fact, when assets are limited, safeguarding them may be even more important. A divorce, lawsuit, or tax hit could wipe out a small inheritance completely.

And remember: wealth grows over time. A $10,000 inheritance left in a protected trust and wisely invested could one day become millions — all shielded for future generations of your ʻohana.

Take Action for Your ʻOhana Today

Estate planning in Hawaiʻi isn’t just about documents — it’s about protecting your family’s financial security for generations. By including a Lifetime Asset Protection Trust in your estate plan, you ensure that what you’ve worked so hard to build will benefit your children and grandchildren, not be lost to divorce, creditors, or unnecessary taxes.

FAQs

What is a Lifetime Asset Protection Trust?

It’s a trust that ensures your child’s inheritance is protected from divorce, lawsuits, and estate taxes, while still allowing them to benefit and even control the assets when appropriate.

Can I add this to my existing trust?

Yes. A Lifetime Asset Protection Trust can be built into your current estate plan.

Do I need to be wealthy for this to make sense?

No. Even small inheritances can grow over time and deserve protection. In fact, safeguarding a modest inheritance may be even more impactful.

📍 Based in Honolulu | Serving all of Hawaiʻi

📅 Schedule your Life & Legacy Planning Session here

📬 Contact us here

📞 You can reach us at 808-725-3454

This article is brought to you by the Law Office of Keoni Souza, a boutique estate planning firm located in Honolulu, Hawaiʻi, proudly serving families on Oʻahu and across the Hawaiian Islands. At our firm, estate planning is about more than documents — it’s about creating lasting peace of mind for you and the people you love. Through our unique Life & Legacy Planning Process, we guide you to make informed, empowered decisions that protect your wealth, your wishes, and your family’s future. To get started, contact our Honolulu office today to schedule your Life & Legacy Planning Session.

Disclaimer: The information on this website is for informational purposes only and should not be considered legal advice. For guidance tailored to your specific situation, please consult an estate planning attorney licensed in the State of Hawaiʻi. Use of this website or communication through this site does not create an attorney-client relationship with the Law Office of Keoni Souza, LLC.