How to Protect Your Child’s Inheritance From Their Spouse
One of the key concerns for many parents is ensuring that the wealth they’ve built up over a lifetime remains protected for future generations. This is especially true in the event of family changes, such as a child’s marriage or partnership breakdown, where the inheritance could be at risk of division. For families in Queensland, there are a number of legal tools and strategies that can help safeguard a child’s inheritance from being subject to claims by a spouse or partner.
In this guide, we’ll explore practical steps you can take to protect your child’s inheritance, including the use of trusts, binding financial agreements, superannuation nominations, and more.
1. Utilise Testamentary Trusts
One of the most effective methods for protecting your child’s inheritance from a spouse or partner is through a testamentary trust. A testamentary trust is a trust established within your will and comes into effect upon your death. It is designed to hold assets on behalf of beneficiaries (such as your children), adding an extra layer of protection against potential claims in the event of a relationship breakdown.
Under Queensland law, the Succession Act 1981 provides guidelines on managing estates, and establishing a testamentary trust can help ensure that assets are managed according to your wishes. A testamentary trust allows you to set conditions for how and when the inheritance is accessed, keeping the inheritance separate from personal assets that could otherwise be subject to division in family law disputes.
2. Encourage Binding Financial Agreements (BFAs)
Another essential tool for inheritance protection is a Binding Financial Agreement (BFA), often referred to as a "prenup" or "postnup". BFAs are legally binding agreements that outline how property and assets will be divided in the event of a relationship breakdown. Encouraging your child to establish a BFA with their spouse or de facto partner can provide clear terms on what happens to their inheritance.
The Succession Act 1981 also allows family members, including spouses, to make claims against an estate if they feel they have not been adequately provided for. By setting up a BFA, you can establish terms that help your child keep their inheritance separate from marital assets, protecting it from any potential claims.
3. Considerations for Blended Families and De Facto Relationships
In today’s world, family structures are often complex, with blended families and de facto relationships becoming more common. In Queensland, de facto relationships are given similar rights to marriages under family law, which means that de facto partners can make claims on assets acquired during the relationship, including inherited assets if they are not protected.
In these scenarios, a testamentary trust or BFA can be especially useful. For blended families, establishing a testamentary trust allows you to ensure that only your biological or legally adopted children receive the inheritance, preventing it from being redirected to stepchildren or other extended family members. When it comes to de facto relationships, a BFA can help outline that your child’s inheritance should remain separate, thereby reducing the risk of it becoming part of a property settlement if the relationship ends.
4. Protect Superannuation with Binding Death Benefit Nominations
Superannuation is often a significant part of a person’s assets, but it is not automatically included in a person’s estate. Superannuation is governed by its own set of rules, and it typically requires a binding death benefit nomination to ensure that the funds go to specific beneficiaries upon death.
In Queensland, a binding death benefit nomination allows your child to direct their superannuation to chosen beneficiaries, such as children or other family members, which helps protect it from claims by a spouse. This is especially relevant if your child has children from a previous relationship or if they want to ensure their superannuation is passed directly to family members rather than being part of a marital asset pool. Note that without this nomination, superannuation may be distributed according to the trustee’s discretion, potentially resulting in disputes.
Additionally, if your child separates from a spouse or partner, superannuation splitting orders can apply, meaning the superannuation could be divided as part of a property settlement. By nominating specific beneficiaries and updating these nominations periodically, your child can safeguard this portion of their assets.
5. Open Communication and Seek Professional Advice
Safeguarding a child’s inheritance goes beyond just setting up legal structures; open communication within the family is equally essential. Having transparent discussions with your child about the purpose and importance of preserving their inheritance, particularly if they are entering a relationship, can make a difference.
The Succession Act 1981 also provides a framework for contesting wills in Queensland. Family members, including spouses and de facto partners, may have grounds to challenge a will if they believe they have been inadequately provided for. By setting up testamentary trusts, clear terms in your will, and discussing BFAs with your child, you can mitigate potential conflicts and ensure your wishes are upheld.
Consulting a family lawyer who is experienced in Queensland’s family law and estate planning is highly advisable. A lawyer can guide you on how best to structure your assets to protect them from family law claims, whether through trusts, BFAs, or other means. The team at Pullos Lawyers is well-equipped to offer comprehensive legal advice tailored to your specific needs.
How to Protect Your Child’s Inheritance from Their Spouse
Planning to protect your child’s inheritance is an important step in ensuring their financial future and safeguarding the legacy you've worked hard to create. Through options like testamentary trusts, binding financial agreements, and carefully structured superannuation nominations, you can give your child peace of mind and security, even through life’s uncertainties.
At Pullos Lawyers, we understand how deeply personal these decisions are. Our compassionate team is here to guide you through each step with understanding, respect and strategies customised to your unique circumstances. Whether you need advice on wills and estate planning, financial agreements, international family law or any other family law issue, we’re here to provide personalised support. You can also read our articles on how to protect assets in a de facto relationship, spousal inheritance after death, and whether future inheritance can be included in divorce settlements. To learn more about how we can help protect your family’s future, contact Pullos Lawyers today.