For many parents, creating a will and an estate plan is not just about managing their financial affairs after they are gone; it’s also about safeguarding their children’s future. Parents often worry about ensuring that their hard-earned assets are passed on to the next generation while protecting those assets from potential complications, such as their children’s relationship breakdowns. In this article, we will explore parents’ concerns and the various ways they can protect their assets (to the best of their ability) to benefit their children in the event of their passing.
One of the primary concerns that parents have when estate planning is the desire to provide for their children’s financial well-being. They want to ensure their children inherit assets, whether a family home, investments, or personal belongings. However, an equally significant concern is the potential vulnerability of these assets if their children’s relationships were to break down. No parent wishes their assets to end up in the hands of a former son or daughter-in-law or be subject to contentious Family Law proceedings.
Thankfully, there are several strategies parents can employ in an attempt to safeguard their assets and ensure that their children are the intended beneficiaries.
Several strategies are available to safeguard inherited assets from being the subject of Family Law proceedings. Among these strategies, the most successful one involves refraining from transferring assets directly to your children. Trust structures play a pivotal role in achieving this goal. Capital trusts, for instance, restrict beneficiaries to receiving only income benefits. This arrangement ensures that, at worst, the Family Court views it as a resource rather than property subject to division during legal proceedings. Another approach is to establish a testamentary trust in your will. Incorporating a testamentary trust into your estate planning can be a strategic approach to enhancing asset protection for your beneficiaries. Leaving the inheritance directly to your children can expose the assets to any family law proceedings.
Binding Financial Agreements
Although trust structures have the potential to safeguard inherited assets, there is no way to guarantee that assets held in a trust will remain protected in the event of a relationship breakdown. Binding Financial Agreements can provide legal protection against relationship breakdowns, which is impossible without trust structures. These enforceable agreements effectively safeguard inherited assets and assets owned prior to the relationship.
Binding Financial Agreements and Will Challenges
For those contemplating the creation of a Binding Financial Agreement, especially in the context of blended families, it is important for the involved parties to meticulously record their intentions regarding their wills if they have not separated at the time of their death. The intentions outlined in a Binding Financial Agreement can serve as a protective measure in family provision claims. Recent legal cases have demonstrated that if a Binding Financial Agreement adequately provides for a surviving spouse or partner, it can be used by the estate to defeat any potential claims, provided that the Binding Financial Agreement was deemed reasonable.
Parents’ concerns about their will and estate plans are understandable, as they want to provide for their children and secure their assets for future generations. While there is no one-size-fits-all solution, various strategies are available to help parents protect their assets from potential relationship breakdowns while ensuring their children receive their inheritance. By engaging in open conversations, seeking professional guidance, and implementing well-thought-out plans, parents can feel more assured that their legacy is safeguarded and that their children’s financial future is protected.
At Bayside Wills & Estates, we understand the importance of safeguarding your financial well-being and protecting your assets from potential risks. We offer a complimentary estate planning consultation to new clients where our experienced lawyers will walk you through the process, taking the time to understand your unique circumstances and crafting a personalized estate plan that reflects your desires.