Question: If our son was getting a divorce and we both died could his wife claim on his inheritance?
Answer: Your son’s inheritance would become one of the assets over which he and his wife would need to come to an agreement – in court if necessary. Wills & Tax Partner Lee Young says, "Historically, the best way to avoid a beneficiary losing their inheritance because they are going through a divorce at the date of death was to ensure that rather than leave them an absolute interest in the estate, their interest is left on trust." Usually a discretionary trust is employed where the potential beneficiaries include all the actual beneficiaries of the estate, the understanding being with the trustees that once the divorce is concluded the fund would then be transferred over to the intended beneficiary. However, judges have recently ‘got wise’ to this and in dividing up the assets in the divorcing couples estate they have assumed that the funds held on discretionary trust will be given to the relevant party of the divorce. Although the judges cannot compel the trustees to make a distribution in favour of either party to the divorce, they will simply divide up the remainder of the couples’ assets more in favour of the one who does not have this trust interest in the background. Not all judges are taking this view but it is becoming increasingly common.
If you were to leave your son’s inheritance to someone else on the understanding that once the ‘divorce dust’ had settled that person would redirect it to your son ( technically this is known as a ‘secret trust’) then the judges would generally not be able to make the assumptions above and this would probably help to ensure your son’s inheritance. Secret trusts are perfectly legal and theoretically enforceable but if no one knows of the terms of the trust other than you (and you are dead) and the person you are trusting – if that person cannot be trusted and does not honour your wishes then there would be little your son could do. Half secret trusts are possible (where the will refers to a trust but its terms are secret) but in those circumstances the courts would would make the correct assumption about the destination of the inheritance. In short there is no simple or guaranteed solution to this problem.
We have offices in the Christchurch, New Milton and the New Forest. Our Wills & Tax team also cover Bournemouth and Poole. For a free initial chat, please call 01202 499255 and Lee or a member of the team will be happy to discuss any questions that you may have.