WILLS & INHERITANCE PROTECTION
Can divorce put my child's inheritance at risk?
You have worked hard to leave something for your children. But what happens if an inheritance you've left to your son or daughter becomes caught up in their divorce?
AN OFTEN OVERLOOKED RISK
Leaving your children an inheritance is one thing. Helping them keep it is another.
Most parents naturally want what they leave behind to benefit their children and, eventually, their grandchildren. Yet once assets are inherited outright, the circumstances of a child's own life can affect what happens to them.
What happens when your child inherits outright?
A Standard Will can leave an estate directly to a son or daughter. Once they inherit, the assets generally become their personal property, whether that's money, investments or a share of a property.
If their marriage later breaks down, the inheritance may form part of the wider financial picture considered during divorce proceedings. This does not mean an inherited asset is automatically divided equally between the spouses. The source of an inheritance matters, but so do the couple's financial needs and the way the inheritance has been used.
An inheritance intended for your child does not necessarily remain separate from their future financial circumstances.
Consider a family example
Imagine parents leaving £200,000 to their daughter, Emma. Their intention is simple: to give her financial security and help preserve something for their grandchildren.
THE INHERITANCE
Emma inherits outright
Emma receives the £200,000 personally. She later uses part of it to help pay for the family home she shares with her husband.
CIRCUMSTANCES CHANGE
The marriage breaks down
During the divorce, the family home and both parties' financial needs must be considered. The inheritance may now influence the settlement, even though the money originally came from Emma's parents.
The point isn't that every divorce puts an inheritance at risk of being split, or that the outcome can be predicted in advance. It is that an outright gift leaves its future protection largely outside the parents' control.
Why can an inheritance become vulnerable?
There are several common reasons a child's inheritance may become relevant when a marriage ends.
The family home
Inherited money might be used towards a deposit, mortgage or improvements to a home shared with a spouse.
Financial needs
Divorce settlements take account of matters such as housing, available resources and the needs of any children.
Outright ownership
Once an inheritance belongs personally to your child, it can be spent, combined with other assets or used in ways you never anticipated.
How can a protective Will trust help?
A Will incorporating suitable trust provisions can offer a different approach. Rather than passing everything directly into a beneficiary's personal ownership, assets can be held within a trust for the benefit of your chosen family members.
For example, a discretionary Will trust can allow trustees to support a son or daughter while retaining assets within the trust when circumstances make an outright distribution less desirable. If a beneficiary is going through a divorce, appropriate trustees can consider whether keeping assets within the trust is the better way to preserve them.
And this doesn't necessarily mean placing the inheritance in the hands of strangers. Your own adult children and other trusted family members can often be appointed as trustees, where appropriate, allowing important decisions to remain within the family.
Proper trust planning also involves choosing suitable trustees, understanding their responsibilities and ensuring the arrangement is managed as intended. No trust guarantees that the Family Court will disregard it in every situation, but a properly structured Will trust can provide meaningful additional protection compared with an unrestricted outright gift.
A QUESTION WORTH ASKING
Will the inheritance you leave remain protected?
You cannot know what circumstances your children may face in ten, twenty or thirty years. But you can consider those possibilities when you make your Will.
If preserving family wealth for your children and grandchildren matters to you, we can discuss whether a protective Will trust would offer advantages over leaving everything outright. I'll explain the options personally and help you decide what best reflects your wishes.
General information for England and Wales. The treatment of inherited assets in divorce and the effectiveness of trust arrangements depend on the individual circumstances.