Protecting Inherited Assets in Divorce
An interesting piece of research has recently been released that reveals many parents are reluctant to leave an inheritance, or give other forms of financial help, to their children once they are married out of fear that the marriage may end in divorce.
Fears over Possibility of Divorce
According to the study, which was published by Investec Wealth & Investment, as many as 30% of parents have admitted having these worries. Their concern centres on the idea that if their child gets divorced, their former spouse may be entitled to a share of any inheritance already received, and therefore assets will end up leaving the immediate family.
These fears appear to be enhanced by a lack of confidence in the durability of their children’s relationships. Around 12% of parents surveyed said their children’s marriages had already broken down and a further 14% reported having little or no confidence they would last a lifetime.
Lack of Financial Competence
The possibility of divorce is not the only reason parents can be reluctant to leave an inheritance to married offspring. The research also uncovered a lack of confidence in the financial competence of their sons and daughters-in-law. Around 42% said they had “limited confidence” in the ability of their in-laws to manage their finances.
It’s not just their children’s partners that parents are worried about. Some have expressed concern about the impact of an inheritance on their own children. Around 20% worry that children will squander any inheritance on luxuries such as expensive holidays, while 14% think it will reduce their incentive to work hard and earn their own money. A further 13% fear that the inheritance will be spent and little will be left for grandchildren and future generations.
“In our experience parents may disapprove of their children’s choice of partner but can be reluctant to interfere in case they cause a family rift,” explained Simon Bashorun, Financial Planning Team Leader, Investec Wealth & Investment. “But with divorce rates as they are in the UK, we are seeing increasing numbers of parents looking to protect wealth from leaving the immediate family, particularly if they’re pessimistic about the state of their children’s marriages.”
Protecting Inherited Assets
Investec identified a number of measures parents are implementing to try and mitigate the risk of assets leaving the family in the event of a divorce:
- 17% of parents are favouring small financial gifts rather than a lump sum to help with day-to-day living,
- 14% have decided to skip a generation and leave assets to their grandchildren, and
- 13% said they are considering a discretionary trust, which can be a useful means to protect family wealth from future divorce within a family.
Another option that families could consider is the use of prenuptial or postnuptial agreements. These can be used to protect inherited assets by clearly setting out how a couple’s assets will be divided in the event of a separation or divorce. Through the use of a professionally prepared agreement, it is possible to protect inherited assets, even if they have been used to purchase an asset that is deemed to be matrimonial property, such as the family home.
For expert legal advice on issues involving divorce and separation, including the protection of inherited assets, then contact our specialist family lawyers today. We regularly assist our clients to negotiate and prepare comprehensive and thorough prenuptial agreements that can help avoid costly disputes in the future.