Inherited Real Estate and Investments: Keeping Assets in the Family 

 Posted on August 17, 2025 in Strategy and Asset Protection

For many families, passing down real estate, investments, and other valuable assets is more than a financial decision about legacy. Whether it is a lake house, farmland, a rental property, or a well-managed investment portfolio, these assets often come with a personal story and a desire to keep them within the family for generations.

However, without proper estate planning, inherited property and investments can be easily lost to divorce, lawsuits, creditors, or unintended beneficiaries. At Gateville Law Firm, our Kendall County, IL asset protection lawyer has over 20 years of experience helping families create thoughtful, protective plans to preserve family wealth and ensure it stays with the right people.

The Emotional and Financial Value of Inherited Assets

Many parents or grandparents gift real estate or investments to their children with the hope that those assets will provide long-term financial stability and remain in the family. These assets commonly include primary residences, vacation homes, rental properties, investment accounts, farmland, and family businesses.

These gifts often carry deep emotional meaning. The property may have been in the family for decades, or the investments represent a lifetime of hard work and sacrifice. But here is the problem: Once those assets are inherited outright, they are vulnerable.

Why Passing Assets Via Simple Inheritance Can Be Risky

If your child or beneficiary receives a valuable asset outright, it becomes their individual property, but it may also become:

• Subject of division in a divorce

• Exposed to creditors or lawsuits

• Mismanaged or sold due to outside influence

• Inaccessible to future generations

Without the right legal structure, inherited wealth can leave the family bloodline more quickly than you may expect.

How to Protect Inherited Real Estate and Investments

A well-crafted estate plan can help ensure that your assets are used wisely, preserved long-term, and protected from external threats. Key strategies include:

Use of a Revocable Living Trust for Passing Down Assets 

Instead of leaving assets directly to your children, you can pass them through a Revocable Living Trust that outlines exactly how and when the assets should be used.

You can:

• Keep the inheritance in a protected sub-trust for your child’s lifetime.

• Specify that the inheritance is for your child and your grandchildren, not their spouse.

• Appoint a trustee to manage investments or real estate responsibly.

This approach gives you greater control and reduces the chance that your assets are lost in a divorce or lawsuit. In your Revocable Living Trust, we can create specific gifts, which can be inherited by children consistent with their parents or grandparents’ wishes.

Clarifying How You Want Your Assets Handled in an Estate Plan

If you have a strong desire for your heirs to keep real estate or investments in the family, your trust can express that intent while allowing flexibility if future generations need to sell or reinvest.

A Common Example of Assets Needing Protection: The Family Vacation Home

Let us say a couple owns a lake house they want to leave for their two children. Without planning, the children inherit it outright, and years later:

• One child divorces, and the property becomes part of the divorce settlement.

• The other child wants to sell it, but their sibling refuses.

• Neither child sets aside funds for maintenance, and the property becomes a burden.

Obviously, these are problems the parents neither foresaw nor intended their children to have to manage. With a trust-based plan, the parents could:

• Keep the property in trust, managed by a trustee.

• Set aside money for upkeep and taxes.

• Allow children to use the home but prohibit sale without agreement or a triggering event.

• Ensure the property passes to grandchildren after the children pass away.

This structure keeps the lake house in the family while reducing conflict and protecting the asset.

A Common Example of Assets Needing Protection: A Large Inheritance

Let us take another common example: Susan inherits $1 million from her parents, which includes investment accounts and rental property. She is married to Andrew, and while their marriage is currently stable, her parents want to ensure that the assets they have worked for a lifetime to build stay within the family, even if Susan’s circumstances change in the future.

Her parents are concerned about a few things. What if Susan and Andrew later divorce? What if Andrew tries to claim the inheritance as part of the marital estate? What happens if Susan passes away unexpectedly — will the assets go to Andrew, or stay with the grandchildren? These are real and valid concerns, especially when a substantial inheritance is involved.

The Risk of Commingling and Divorce

In Illinois, inherited property is considered non-marital as long as it remains separate. However, if Susan adds Andrew’s name to the property deed, deposits investment income into a joint account, or uses inherited funds for joint purchases, the inherited assets can become commingled with marital property. This can cause them to lose their non-marital status under Illinois law.

In the event of a divorce, Andrew could potentially claim a share of the inheritance, even though Susan’s parents intended those assets to benefit only Susan and remain within the family.

The Solution for Risky Inheritance Problems: A Thoughtful, Trust-Based Estate Plan

To honor their wishes and protect the family legacy, Susan’s parents can use a Revocable Living Trust with specific language that:

• Gifts the $1 million in assets directly to Susan’s trust, not to Susan individually.

• Clearly states the gift is to be treated as non-marital property.

• Appoints a successor trustee to manage the assets if Susan becomes incapacitated.

• Includes instructions for what happens after Susan’s death, such as distributing the assets to Susan’s children, rather than her spouse.

This kind of planning provides clarity, legal protection, and peace of mind for both Susan and her parents.

Why Careful Estate Planning Matters

Too often, inheritances are given directly to adult children without proper legal planning. This creates unnecessary risks, especially in the case of divorce, second marriages, financial mismanagement and credit issues, and premature death or incapacity. By placing inherited real estate and investments into a properly structured Revocable Living Trust, parents can:

• Preserve the non-marital character of the assets.

• Ensure the inheritance is used only for their child and grandchildren.

• Avoid the probate court process.

• Protecting the assets from being lost to unintended parties

Call our Kendall County, IL Estate Planning Lawyer to Protect Your Family’s Legacy

Inheritance is about more than money; it is about preserving family values, honoring your life’s work, and protecting your children and grandchildren.

If you are considering how to pass on real estate, investments, or family wealth, let Gateville Law Firm help you design an estate plan that protects your legacy with intention and care. Our Plainfield, IL asset protection attorney can help you design an estate plan that carefully guards your wishes and your beneficiaries’ interests. Call 630-780-1034 now.