Children First: Avoid Spousal Claims on Inheritance

Want to leave money to your children but don’t wish their spouses to take control? We look at how to avoid spousal claims on inheritance.

The first example is a marriage with the risk of divorce.  This could mean any money your child receives as an inheritance will be at risk when a financial settlement is made. The court could decide that their spouse should receive half or even more than half, depending on the circumstances.

Alternatively, inheritance could be at risk in another way.  Your child’s spouse is facing bankruptcy or might be investing in a risky business. Protecting your estate so that your child can benefit from it for the rest of their lives, requires consideration when making a Will.

Make sure you leave a Will

Step one is to make sure that you have a Will in place. Without a Will, your estate might not pass to the beneficiaries whom you wish to receive it.   Not having a Will means all of your assets pass in accordance with the Rules of Intestacy. These rules set out in strict order of priority who inherits and how much they will receive.

For example, if you are married with children, your spouse inherits the first £270,000 of your estate plus all of your personal possessions. The remainder of your estate is split in half, your spouse receives one half and your children share the remaining half equally. In some situations, this means that your children could receive substantially less than your spouse, which might not be what you want. If your children are married, then any money received is at high risk of being considered a matrimonial asset.  This could be considered in a financial settlement, should they divorce in the future.

Consider putting assets in trust

Take steps to protect assets for your children by using your Will to place the assets into a discretionary trust. The trustees can use the assets to benefit your children.  Additionally, you can leave a letter of wishes outlining how you would like this to be done.

However, money held in trust is not guaranteed to be completely safe from divorce.  Always seek professional legal advice to ensure that you structure your estate in the best way possible for your circumstances. The court could still decide to take trust assets into account.  Assessing them as a financial resource when deciding how much each party should receive. 

It can often be preferable to try and protect assets as far as possible by setting up a trust to benefit your children.  This is a better alternative than leaving them money outright, which would certainly be taken into account by the court in dealing with financial matters on divorce.

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