Simple Steps To Keep Your Childs Inheritance Protected

Safeguarding your child's inheritance amidst the uncertainty of divorce is a top priority for many parents. The fear that money or assets gifted to your child could be lost in the event of a split is real and pressing. Fortunately, there are several proactive measures you can take to ensure your child's financial future remains secure. Here’s a comprehensive guide on protecting your child's inheritance from being claimed by an ex-partner during a divorce.

Financial Agreements: Prenuptial and Postnuptial Contracts

One effective way to protect your child's inheritance is by encouraging them and their spouse to enter into a financial agreement, commonly known as a prenuptial agreement (prenup) or postnuptial agreement (postnup). These legally binding documents outline how assets will be divided in the event of a divorce.

A properly drafted financial agreement can help prevent claims on your child's inheritance by an estranged spouse. It’s crucial to seek assistance from a qualified family lawyer to ensure the agreement is robust and enforceable. This legal step can prevent lengthy and stressful disputes in court, providing peace of mind for both you and your child.

Loan Instead of Gift: Protecting Assets Through Structured Lending

Instead of gifting money outright to your child, consider loaning the amount. Loans are generally less likely to be considered divisible assets in divorce proceedings compared to outright gifts. This method can provide an added layer of protection for your child's inheritance.

To formalise the loan, have a solicitor draw up a Deed of Loan. This document will specify the loan amount, terms, purpose, and any interest to be charged. Many parents opt to forgive the loan at a later date, either while still alive or through their will, thus ensuring the funds remain protected while also offering flexibility.

Testamentary Trusts: Securing Future Inheritances

If you have not yet passed on your child's inheritance, establishing a testamentary trust can be a strategic move. A testamentary trust is a legal structure created within your will that places assets under the control of a trustee, who will distribute them according to your specified wishes upon your death.

While not an absolute shield against the Family Court's far-reaching powers, a testamentary trust can significantly reduce the risk of an inheritance being claimed by a divorcing partner. This trust ensures that your assets are managed and distributed with your intentions in mind, providing a level of protection for your child’s financial future.

Seeking Legal Consultation: Navigating Complex Legalities

Regardless of which strategy you choose—financial agreements, loan arrangements, or testamentary trusts—it is vital to seek legal advice. Consulting with a family lawyer can guide you through the complexities of each option and ensure your chosen strategy aligns with your goals. Professional advice is essential in navigating the legal landscape and making informed decisions that safeguard your child's inheritance.

Additional Considerations: Protecting Your Own Assets

If you are remarried or considering remarriage, these strategies can also help protect your own assets from being lost in a potential divorce. Implementing similar measures ensures that your children’s inheritance remains intact, regardless of any changes in your marital status.

Divorce can disrupt plans for your family’s future, but by taking proactive steps, you can protect your child's inheritance from being lost. Encourage financial agreements, consider loans instead of outright gifts, establish testamentary trusts, and seek legal advice to navigate these strategies effectively. By planning thoughtfully and taking protective measures, you can help safeguard your family's financial future against the uncertainties of divorce.

If you are navigating divorce and want professional advice - book a call with the Life Sumo Team today.

This provides general educational information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. Life Sumo (Orion Enterprises (Cairns) Pty Ltd) has representatives that are authorised to provide personal financial advice.