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Making your Child's Inheritance Divorce-Proof

How to make sure your married child's inhertance is just for them - even if their marriage ends

Making Your Child’s Inheritance Divorce-Proof

Marriage isn't always forever - is there a way to protect your child's inheritance from the consequences of a divorce?

When it comes to intelligent estate-planning, the object of the exercise is to ensure that your assets are protected and your wishes are respected, but many circumstances can interfere with this aim, not least of which is your adult child’s choice of life-partner.

We all want our children to grow up to lead fulfilling, happy lives and to have contented and loving marriages and families of their own.  But we’re not always confident that our child’s marriage will last forever, no matter how blissful the happy couple are on their wedding day.

What Parents Secretly Fear

Some parents, for all kinds of reasons, simply don’t fully approve of their child’s choice of life partner. While other parents think the world of their son or daughter-in-law, but are painfully aware, from their own experiences or those of people close to them, that marriage can be hard, and that 40% of marriages don’t stay the course.

This is an issue that comes up time and time again when we work with couples whose children have grown up and married. But it’s an uncomfortable issue, that’s often spoken of in hushed, slightly embarrassed tones.

Here is a selection of snapshots from the many conversations we’ve had with parents of adult children:

“I just don’t trust my son in law. I’ve never approved of him, although I’d never let my daughter know that. Between you and me, I wouldn’t put it past him to divorce her as soon as she’s inherited from me, and walk off with half her inheritance”

“My son is married for the second time. He’s had a, shall we say, interesting relationship history. He’s married to a lovely girl now, but who knows if this marriage will last? What if he gets divorced again after I’m gone? How much of my legacy will his wife be entitled to?”

“Is there any way I can make sure my daughter’s inheritance is just for her? I think the world of her husband, but that doesn’t mean I would want him to walk away with half my daughter’s inheritance if they divorced. Fond as I am of my son in law, he’s not my child – he’s got his own mum and dad to provide for him.”

“My son’s marriage has broken down. They’re separated and I don’t know what’s going to happen next. They might get back together, or they might divorce. Whatever happens, it’s my son and grandchildren I want to provide security for. Can I provide for them in a way that’s divorce-proof?”

If you have similar concerns, you’re far from alone. Most parents have thought about this issue, and most are a little embarrassed to discuss it. But it’s only natural to want to provide security for your child. Your son or daughter in-law isn’t your own child, however close your family is. They have their own parents to provide for them. And chances are, their own parents will have entertained exactly the same concerns.

Imperfect Solutions

One couple who came to us were rather bruised by the consequences of a well-meaning but ultimately unsuccessful attempt to solve the problem. Their daughter had delightedly announced her engagement to a man of whom they did not wholeheartedly approve. Amid the preparations for the wedding, they tentatively asked their daughter if she would consider a prenuptial agreement. They even offered to pay for a lawyer to draw it up. Their daughter was terribly offended by the suggestion, and almost banned them from the wedding, so they backed down. A prenuptial agreement would not necessarily have worked in any event. In the British divorce courts, a prenuptial agreement is persuasive, but not legally binding. The divorce courts could still have transferred a portion of their daughter’s inheritance to their son in law, if circumstances meant this was an appropriate outcome.

Some couples decide to “skip a generation”, disinheriting their child in favour of their grandchildren. But that can feel like a deeply unsatisfactory solution, depriving their child altogether in the name of keeping assets out of reach of their son or daughter in-law. And in any event, it doesn’t make their grandchild’s inheritance any more divorce-proof than it would their child’s.

Divorce-Proof Inheritance.

A properly thought-out estate plan can be made divorce-proof, if it includes one very effective element – a FamilyTrust Will. This kind of Will provides flexibly for your spouse, children and later generations in turn, for up to 125 years after the end of your life, whilst protecting your assets from those outside the family circle who might otherwise be able to take a slice.

In a FamilyTrust Will, you leave your assets in the care of Trustees. Trustees are usually close family members, or professionals, or a combination. The job of the Trustees is to safeguard your assets on behalf of the people you want to provide for, usually your spouse, children and subsequent generations. The spouses of beneficiaries are excluded from benefiting.

The beneficiaries can make use of the trust’s assets – such as by living in your house or receiving interest from your investments - at the trustees’ discretion. The trustees also have the power to distribute larger sums of trust money to beneficiaries on loan, stipulating that the monies must be repaid if requested.

But the important feature of a family trust of this nature, is that your beneficiaries never acquire full ownership of the assets on paper. So, if your child is a beneficiary of the trust created by such a will, any assets or money they receive from the trust are excluded from the divorce courts’ decision making.  

Consequently, they can use and enjoy their inheritance, but it stays out of reach of their ex-spouse on divorce. Even if a portion of trust money is advanced to your child to buy their matrimonial home, that cash advance can be expressed as a loan repayable to the trust on demand, so the division of the matrimonial home has to be after deduction of the trust monies advanced.

Sounds Expensive?

Is this an expensive solution? Not really. Typically, the cost of an estate plan that incorporates a Family Trust Will is a miniscule fraction of the value of the assets you want to protect. It’s a cost-effective solution for preserving assets within the family, and making your child’s inheritance divorce-proof.

If this is a live issue for you, and you’d like to explore how to plan forward to make your child’s inheritance divorce-proof, all you have to do is get in touch, either by phone on 0151 601 5399 or by filling in the contact form below.

A consultation, to look carefully at your individual circumstances and consider appropriate solutions, is free of charge. This will arm you with all the knowledge you need to make informed decisions about your family’s future

"You are so efficient, which is really impressive - thanks, Gina."

Neil Ridpath, Financial Advisor

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