To want to protect my Children's inheritance

[Starssunmoonsky]

Not really an aibu, but I thought I'd post here for traffic.

I'm about to make a Will, but have no idea how I can protect my DC's inheritance from future spouses, or even if it's possible to.

I've got two DC's who are both young adults now, and my DS has just got engaged to his girlfriend. She's a great girl and I think a lot of her and hope she and my DS have a long happy future together.
However, as we all know, unfortunately sometimes marriages don't last and I wouldn't want my DC's to have to hand over half of their inheritance, especially if they end up having a short lived marriage.

I understand that they are the ones who make their own choices and decisions regarding getting married, but when they're 'young and in love' they often don't see that relationships don't always last.

Is there any way I can protect them financially do you know?

It depends very much on the trust. Simple trusts can be set up fairly cheaply, costing around the £1000 mark, whereas others are far more expensive.

And yes, they are commonly used to mitigate IHT, or avoid it altogether.

I thought that if you left your money to a son/daughter that it would remain theirs on divorce providing that it had not been used 'jointly'.
So if they keep the money separate from household accounts it wouldn't be counted in a divorce settlement but if they pooled it to say buy a house for the family, then it would?
But I am not a lawyer!! And it would seem an odd way to conduct a marriage!!

I'm in a similar position, but have decided not to pursue any kind of trust or restriction, because it feels like trying to control events from beyond the grave. I'll be dead when DC inherit so I won't know anything about how the money is spent or shared. But it seems that you are not willing to contemplate any other point of view than your own, OP.

Thank you @notlucreziaborgia. I know I should also get legal advice but it is far better using that hour/s armed with some knowledge. If it starts at as little as £1k, surely people would be mad not to consider it? Anyone who owns property in London for example would be close to going over the IHT threshold. Is stamp
duty payable on putting existing property in trust or are you better off selling and buying again and putting the new property in trust before you do so?

In what way am I not contemplating any other point of view?
I know when I'm dead and gone I won't care about what happens, I think you're missing the point of my whole post, as are a few others.

The problem isn’t setting up a trust - that’s cheap. It’s the running of it. You need to ensure the appointed trustees are going to be reliable and honest and put down beneficiary details for descendants as soon as they are born. To get that level of service you often need a bank or large legal firm to do the admin and they charge lots.

I think you just have to normalise having healthy conversations about money at home, making good sensible financial choices and let them experience the world themselves.

I have inherited a fair bit. I've seen a number of my friends get f*ed over in divorces financially, and its coloured the way I see the world. I don't want to marry. I have a long term DP and we have a child together - I came into the relationship with substantially more than him. We share a joint account and are equal with what we put in. I pay more for renovations / holidays / extra costs etc. He benefits from my assets in that the income from them gets added to the family pot, and I'm happy with that, but the actual assets are mine and he has no claim on that if we were to split. Everything I own is for our child eventually.

My parents were financially very shrewd, sensible people and I think that's been the most helpful thing for me. I grew up with it being normal to contribute to savings and to live within your means, and to invest. They instilled in me the value of a pound and their guidance is always in the back of my mind. You have to trust that you have done a good job as a parent and let them make their own way.

It isn’t just the cost of setting up a trust that needs to be considered, but the cost of maintaining one. Again that can vary, depending on the trust, the assets held, and the trustees themselves.

You really would need legal advice, from someone that specialises in this area.

The trust approach doesn’t necessarily solve the divorce problem anyway. It’s perfectly possible for the divorce court to say ‘ok DS, you are the beneficiary of this family trust, so your needs are going to be taken care of by the trust; in which case exDIL gets all (or a bigger share of) the assets of the marriage to meet her needs’. It’s just swapping one pot of money for another.

I think you’re overthinking this a bit. Write the will and leave it to your children.

Your children will inherit and how they then choose to protect this wealth is kinda up to them unfortunately. When they choose to get married they could put some protection in to ring fence certain assets as theirs and not their spouses but if you haven’t died yet it would all be hypothetical.

PLEASE don't do this. My parents considered just this as they (for good reasons!) disliked my exH. When I finally left, the inheritance meant I did not end up with my children in B&B (not joking -there were no council places and I was unable to work at that time so not able to secure a rental either). Literally saved us.

Look into pre nuptial arrangements that can ring-fence inheritance. I'm not sure you can enforce your children do it though, even though it's a great idea - love is blind etc.

it's got nothing to do with him getting engaged.

You're planting a seed, an idea, that all potential partners are gold diggers.

It's just one of those things that once the seed is planted, sometimes it cannot be undone.

And yes, said friend is rather wealthy, but his obsession with the inheritance and potential gold diggers has had such a negative effect on the sons that one in particular has become so anal about money. It's quite sad to see as he is a high earner himself! (as a side note, Friend lost all his mothers sentimental/expensive jewellery due to his mother remarrying after his dad died, then when she died it all went to the new husband and them subsequently he left it to his two daughters.).

You just need to tread carefully and make life about love and not money...

What if your daughter married a very wealthy man, had children and then they divorced only for her to find out all his wealth was tied up in a trust or other method to ensure her ex walked away with all his wealth? And she got nothing.

I don’t think you would happy with trusts etc then.

I am not a fan of this method of dealing with inherited wealth (and I am likely to inherit very well) to avoid IHT or deprive future spouses of it.

My in laws delighted in telling me that if my husband perished before them, that his share would go into trust for the kids when they come of age so I don't accidentally benefit from it too

You need to get advice from an estate planner. This is completely different from a solicitor. You will have to do some googling in your area and try to get references/ personal recommendations.

I think typically short marriages and also SOW are considered when splitting marital assets so I don’t think it’s necessarily true the spouse would automatically get half of one of your DCs inherited whilst married and then got divorced. A trust could be an option but any money withdrawn from the trust would become a marital asset so if your DC wanted to withdraw and spend their inheritance (on a property, for example) then that would become a marital asset (not withstanding my initial point about sue consideration from the courts). The issue you have is any measures taken to limit the possibility of the spouse getting half the inheritance in a divorce would also limit the extent to which your DC can put the money ‘to use’ if that makes sense? Definitely worth a chat with a solicitor.

I'll be honest, I don't like the principle of what you're suggesting, despite being at the losing end of asset splits. It does feel weird and controlling to place conditions on what is effectively a gift.

I wonder how you would feel if one of your children married someone, a long marriage with children and were excluded like that. Imagine your daughter is widowed and loses income or assets because her in-laws wanted to protect their son. I know I'd be pretty unimpressed.

I'd be careful with this. One, because if the shoe was on the other foot you mightn't like it. And two, because if my in-laws treated me in such an unwelcoming way with such distrust I would struggle to feel like they were family in the same way.

Why does she need to consider a situation that isn’t relevant to her? Richer or poorer, she is going to be pro the interests of her children, which is entirely normal tbh.

You don’t need to be a fan of it.

I’m my experience(and I deal with significantly wealthy people in my line of work), people’s behaviour and attitudes to money depends mainly on their nature, not how much they have. I’ve known very wealthy people who didn’t want to leave anything to their kids (wanted them to work for what they have) and I’ve known people with a relatively limited means tie themselves up in knots over it. Money doesn’t change who we are it just gives us an opportunity to display our character (in my experience).

Also, with respect, you have no idea who’s wealthy the OP is. Anyone with a property is leaving a large chunk of money so she needed be loaded to be writing a will and considering how best to protect the money she is leaving.

Whatever you choose you really need to consider all the 'what ifs'. But there will potentially be a scenario which you haven't considered which just makes all your carefully plans a conditions a burden for your DCs.

I think my DM is planning to leave her estate to DGCs tied up in a trust. Except DGCs are all adults and DBs and I (trustees) are all in our 50s or older. Knowing DM it will be a nightmare to resolve especially as one DB wants to play at being trust fund king.

As a result of this we have left our estate to our DCs unencumbered by ridiculous ties. Depending on when we die, our estate could be worth £1m, a few hundred thousands or nothing.

The last thing I want to leave my DCs is an overcomplicated mess set up to deal with a situation which no longer applies and which will take a team if accountants and lawyers charging big bucks to sort out.

Ì know wills can be rewritten but I don't want to spend my dotage trotting backwards and forwards to Solicitors rewriting my will every time the wind changes.

You have to be very careful about this sort of financial planning and getting it done properly is expensive and only worth it for estates over about £10 million. As someone has said previously, reputable trustees are expensive and there is an increasing amount of admin involved which costs money. Also trusts do not ‘mitigate’ IHT anymore. Almost all tax benefits related to trusts both on and offshore have been completely dismantled by HMRC. Let your kids make their own decisions, the only people who will benefit from your attempts at control will be the financial services companies.

This is ridiculous.

How do you propose to keep your money away from the spouses? Are you going to stipulate what your children can spend the inheritance on to make sure their gold digging partners don’t get their grubby mits on it? So no holidays, no spending it on things which can’t be kept after the divorce? You literally cannot ensure that any spouse doesn’t get their hands on it, because if the money is theirs then it’s theirs to do with as they wish, the only way you could ringfence it would be if it was still left at the time of the divorce.

My money is kept in trust until my DC are 25 purely so they grow up a bit first before potentially frivolously blowing the lot, but after that they’re adults responsible for their own decisions in life.

Stop infantilising your children.None of this is going to make a positive relationship between you and any possible inlaws, and possibly even you and your children.

If my parents were that controlling I’d tell them to stick their inheritance.

Have some of it bequeathed when they reach a certain age? If they've by that point had a long marriage surely you'd feel OK with her getting some of it?

And as a pp says, leave some to any grandkids?

Statistically it's way more likely that he'd have an affair and end the marriage than her!

“Also trusts do not ‘mitigate’ IHT anymore. Almost all tax benefits related to trusts both on and offshore have been completely dismantled by HMRC.”

this is not true.