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Divorce advice: the Sandy and Danny scenario

Sandy and Danny.jpg

Her parents weren’t best pleased when she decided to marry an aspiring mechanic. With his history of infidelity, poor job prospects and dodgy mates, they had planned to pass some of their wealth to Sandy to circumvent inheritance tax, but are now thinking better of it. The couple are at daggers-drawn - can they protect any inheritance they pass on in the event that the teenage sweethearts finally decide that enough is enough?

Financial lesson: There are options for protecting wealth you intend your married child to inherit. In general, inheritance is not considered ‘marital property’ and instead belongs to the person who received the inheritance, and therefore isn’t divided on divorce. However, you need to make sure you have kept any inheritance separate. If your inheritance is in cash and you put it in a joint account, it’s considered ‘commingled’ and your spouse will be entitled to half.      

Fact: Parents not best pleased with their children’s choice of partner can use structures called trusts to determine where the money goes.  Sandy’s parents could leave her money in trust and their appointed trustees will oversee how this is handled and how any income is paid out to her. For those with grandchildren, if you gift assets to them, you can set out in your will that your executor and not the grandchild’s parent is to manage that grandchild’s gift until it is paid out to the grandchild.  

For more information about divorce, have a look at our Distressed Divorcer (Di-lighted) tribe. There's a new Boring Money Guide to Divorce for the new year.