Divorce rates are increasing around the world, and relationship experts warn the pandemic-induced break-up curve may not have peaked yet. Although you can’t protect your child from heartbreak, you can protect their inheritance being lost to an ex-spouse through some savvy estate planning techniques, as described below.
- Encourage them to utilize a prenuptial agreement: Properly executed, a premarital agreement can help establish and protect the inheritance rights of your heirs. A well-drafted agreement secures your child’s inherited wealth (including heirlooms, business shares, real estate, etc.) from becoming communal or marital property, ensuring that it remains in the birth family and does not pass to the family of a divorced spouse.
- Leverage the protective power of a trust: The best way to structure a safe wealth transfer to shield your family’s inheritance in case of divorce is via a trust. You can activate a trust while you are living, or have it created for the time of your passing. A trust is a legal relationship that maintains your ownership of an asset on behalf of your beneficiary. It can provide taxation, matrimonial, and credit protection.
- Outright distribution titled and maintained in your child’s name: Have your child take the proper steps to keep inherited assets segregated from marital holdings. Avoid titling the assets in joint names. This method is complex and less effective than a trust.
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MacMillan Estate Planning offers a holistic approach to estate planning with all the people, processes, and technology that you need to plan your estate – either in person or virtually. Our team of lawyers, accountants, financial planners, and counsellors offer a refreshing alternative to the banks, law firms and accountancy firms.