Asset protections for a married beneficiary
If an intended beneficiary is married or in a de facto relationship, an uncomfortable question can sometime arise – will the relationship last?
Unfortunately, many marriages or relationships fail. A failed marriage / relationship can lead to “leakage” of a share of the estate to the beneficiary’s ex spouse (though family court proceedings).
A Flexible Will incorporating a testamentary trust is a more flexible structure for the married beneficiary. Each beneficiary can choose, at the time of your death, whether or not they want to take advantage of the more flexible option. If a beneficiary chooses not to take advantage of the more flexible structure, then the Flexible Will simply operates just like a traditional will.
The asset protection benefits of a Flexible Will for a married beneficiary, or a beneficiary in a de facto relationship, are highlighted in the following example:-
Bill and Ben are best friends. Unfortunately, both Bill and Ben’s parents died in the last few years. Both Bill and Ben inherited about $500,000 from their parents’ estates.
Both of them have been experiencing marital problems for years. They have both recently separated. Neither of them told their parents of their marital woes. In fact, at the time Ben’s parents died, there was no sign of any problems in the marriage.
| Issue | Bill | Ben |
| Will | Bill’s parents did a Traditional Will. Under the will, Bill was left everything. | Ben’s parents left a Flexible Will, in which they established a testamentary trust for Ben. |
| Allocation of Estate | Bill’s inheritance merged into and became part of his matrimonial assets. | Ben’s inheritance was held in the testamentary trust. |
| Family Law Proceedings | Bill’s wife claimed a share of all the matrimonial assets, including Bill’s inheritance. At the time of the separation, the total assets were only $600,000. Bill’s wife received $300,000 in the divorce (50% of the overall assets). | Because Ben’s inheritance was in a testamentary trust, Ben argued it was not available in the divorce. The matrimonial assets were $100,000 and the trust had assets of $500,000 (like Bill, a total asset pool of $600,000). |
| Flexibility | Unfortunately, Bill had no option but to share his inheritance with his ex-wife. | Both Ben and his wife were aware (from legal advice) that the Family Court had the power to give Ben’s wife a share of the assets in the trust but that there was no guarantee it would do so. With this in mind, Ben was able to negotiate a settlement out of Court under which Ben’s wife 20% of the trust assets. |
| Result | Effectively, Bill’s ex-wife ended up with half of his inheritance ($250,000). Bill was not happy with this. | Ben’s wife ended up with 20% of his inheritance ($100,000). Ben could live with this, particularly when he saw what happened to Bill. |
To find out more about whether a Flexible Will is right for you, contact us.
