Family Law Considerations When Protecting Your Child’s Inheritance

Parents get excited when their children get married, welcoming a new person into their lives for the rest of their lives. Nevertheless, reality can take its own turn and lead to divorce. In the process, you cannot protect your child from emotional disturbance, but you can take steps to shield their inheritance. 

Apply family law considerations like projecting trust in order to separate inheritance from marital property and control distributions. If that doesn't work, you can go for other options: prenuptial agreement, life insurance, utilising an LLC for property or business assets. 

How Pakistan Treats & Protects Inheritance in Divorce

Pakistan follows an equal distribution system in family law which states that marital property is not divided equally but fairly during divorce. Inheritance of one spouse is a separate entity but can be included in marital property if combined. 

For example, if your child deposits his/her inherit money into the joint bank account with their spouse, then it becomes marital property and is no longer a separate inheritance property. The same is the case with home property; if the inherited home is used as a couple's residence, it becomes marital property and cannot be reversed. 

Create or Look for a Trust

• Try to establish trust as it's the most effective way to shield your assets and property from any hard circumstances like divorce, lawsuits and creditors. A family lawyer in Pakistan would help you to create an effective trust.

• Revocable Trust: It offers flexibility while you're alive, ensuring that your assets are distributed and handled fairly based on predetermined rules. With the help of a trust, no child owns the assets, and it helps to prevent them from becoming marital property. 

• Irrevocable Trust: this trust is even stronger than the above one as it avoids the grantor from reclaiming the assets. Thus it ensures the assets are being protected not just from divorce but also from legal claims and creditors. 

• Testamentary Test: It is created in the form of a will, which takes effect after your death. This trust allows you to control how and the share of inheritance is divided among children. 

• Discretionary Trust: In this case, the trustee has control over the distribution of assets, which can shield assets from being claimed in a divorce, as the child doesn’t have direct ownership. 
  
  

Take Help From Other Strategies 

Inspire your child to have prenuptial or postnuptial agreements. These are legal agreements between your child and their spouse in family law that can illustrate how inherited assets must be handled if they get divorced. You can also use online legal services to better understand how to create these agreements.  This can give extra defence for those assets.

Utilising a Limited Liability Company (LLC) is another way to safeguard valuable assets, like a family business or property. An LLC can keep those assets separate from your child's personal belongings and any shared property in their marriage.

Check the names and titles on your beneficiary designations. Make sure that things like life insurance policies, retirement accounts, and bank accounts that pay to someone upon your death have the right person listed. These kinds of assets usually go directly to the named beneficiary and don’t go through the probate process or your will.

Make mutual wills: A mutual will is a legal agreement between two spouses that says they won’t change their wills after the other one passes away. This can help protect gifts that are meant for their children.

Consider the Inheritance as a Loan 

In some jurisdictions and family law, parents can structure the transfer of funds as a formal loan rather than a gift.

• A legally documented loan agreement can be executed between you (or your trust) and your child.

• If your child's marriage ends, the loan can be repaid to you or your estate, rather than being treated as a divisible asset of the marriage.
  

Ask Your Children to Keep Your Inherited Assets Separate 

• If you give an inheritance directly to your child, they need to make sure the assets stay separate from their spouse's property.

• Don't mix funds: This means putting inherited money into a separate bank account, not a shared account used by both spouses.

• Use separate money for buying things: If your child uses the inherited money to buy a house or property with their spouse, that asset might become part of their shared marital property and could be divided later.

It's Better to Have Up-to-Date Documents 

No matter what plans you choose, it's important to look at and change your estate documents from time to time. Big events in your life, such as your kids getting married or going through a divorce, should make you check your will, trusts, and who you've named as beneficiaries to make sure everything matches what you want.

Conclusion: Consult with a Specialist 

Proceeding with an extensive plan to protect an inheritance involves complex planning.  It's wise to consult with a seasoned estate planning attorney who specialises in family law to ensure legal protection. They can aid in organising your assets to reduce threats and offer enduring security for your offspring and descendants.