Protecting inheritances

How do I protect my children's inheritance from divorce or creditors?

By Adrian Harris, SAPEPAA Certified Adviser

In many cases you can. With the right structure, an inheritance can be made much harder for a child's former partner or creditors to reach, and kept in the family for the next generation. How depends on your family, your assets and how they are held — so it starts with a conversation.

What puts an inheritance at risk

Most Wills leave everything to children outright. From that moment it is legally theirs — and exposed to whatever happens in their life.

Relationship breakdown

An inheritance held in a child's own name, or mixed with joint assets, can end up in a property settlement with a former partner.

Business failure or bankruptcy

Assets a child owns personally may be available to their creditors if a business fails or a guarantee is called on.

Vulnerability

Young adults, children with an addiction or a disability, or those easily influenced can lose an inheritance quickly — and some may lose government support.

A standard Will, or a Will kit, usually does nothing to address these risks. It simply hands the assets over.

What's possible

Depending on your situation, families can achieve outcomes like these.
  • Keep the inheritance separate from each child's personal assets, rather than handing it over outright.
  • Decide who controls it — and who takes over if that person dies or loses capacity.
  • Protect a vulnerable child while still providing for them properly.
  • Keep wealth in the bloodline, so it passes to your grandchildren rather than a child's former partner.
  • Improve the tax outcome on income the inheritance earns, in the right circumstances.
  • Make your plan harder to challenge by lining up your Will, super, trusts and ownership.

Why there's no one-size answer

The right approach turns on things only your family can tell us:

  • how your wealth is held — personally, jointly, in super, in a family trust or a company
  • each child's circumstances: relationships, business risk, health and maturity
  • who you trust to make decisions after you, and who could challenge your plan
  • what your existing Will, trust deeds and nominations already say
No structure is bulletproof. Courts dealing with family law and bankruptcy can look at how trusts are set up and controlled. Good planning makes an inheritance much harder to reach; anyone promising it can never be touched is overselling.

How we approach it

We use estate and asset protection strategies from SAPEPAA, including Family Protection Trusts, the Protector Strategy and Family Provision Defence strategies. Legal documents are drafted by LY Legal.

1

Tell us about your family

Take the free Stress Test, or contact us directly.

2

Free 30-minute review

We discuss your situation and which outcomes are realistic for you.

3

Your options, in writing

If you go further, a Family Protection Snapshot sets out your options and their consequences.

Talk to us about your family Take the free Stress Test