How to Avoid Spousal Claims on Inheritance

Passing your wealth to your children requires strategic estate planning. Without proper safeguards, an inheritance can easily be lost to a child’s financial settlement during a divorce, or claimed by creditors in a bankruptcy proceeding. If you wish to leave money to your children but don’t want their spouses to take control, see how to avoid spousal claims on inheritance.

Key Risks to Unprotected Inheritance

• Divorce Settlements: Money or assets given directly to a child can be categorised as a matrimonial asset. In the event of a divorce, a family court may award 50% or more of that inheritance to your child’s ex-spouse.

• Bankruptcy & Risky Investments: If your child’s spouse faces insolvency, severe debt, or high-risk business ventures, an unprotected inheritance can be seized by creditors to pay off those debts.

Step 1: Write a Valid Will to Avoid Intestacy Rules

The fundamental step in protecting your estate is to write a legally binding Will. Dying without a Will (dying “intestate”) leaves the distribution of your assets strictly up to the Rules of Intestacy.

Under UK intestacy laws, your estate is automatically divided by a strict legal formula:

1. Spouse’s Share: Your surviving spouse receives all personal possessions and the first £270,000 of your estate.

2. Remaining Estate: The balance over £270,000 is split in half—50% goes to your spouse, and the remaining 50% is divided equally among your children.

Children can be left with significantly less than intended. Furthermore, any funds your children do receive under intestacy rules, become vulnerable to future divorce claims or bankruptcy.

Step 2: Use Trusts for Enhanced Asset Protection

Consider using a Discretionary Trust in your Will instead of a direct gift.  Ensure your child benefits from their inheritance for the rest of their life without external risks.

• How it works: Assets held in a trust are legally owned by trustees, not your child directly.

• The benefit: Because the inheritance does not belong outright to your child, it is generally shielded from divorce settlements, ex-spouses, and bankruptcy creditors.

However, trust assets aren’t completely divorce-proof. Always seek legal advice to structure your estate effectively. Courts can consider trust assets as financial resources in divorce settlements.

Setting up a trust for your children often protects assets better than outright gifts. Outright gifts are more likely to be included in divorce proceedings.

Contact Us

If you would like to speak to one of our experts call us FREE on 0800 781 6658 or email us at enquiries@estplan.co.uk