How can I cut off my troubled sister from my grandmother’s inheritance?

My grandmother is 95 years old, fit and healthy. Unfortunately, my mother passed away, so my grandmother’s wish is to leave 50 percent of her estate to me and my brother.

My brother is married to a woman, but she has significant mental health issues and their marriage is often difficult.

So that her future wife would not potentially be entitled to this inheritance, we discussed leaving 100 percent of my grandmother to me.

My brother and I have a very good and close relationship. This will keep the money safely under my control. When the time is right, I would use the money to provide things for my brother, such as a car, vacation, etc.

My question: are there any tax consequences to spending potentially large sums of money on “gifts” for my brother?

Other information, if relevant, is that I have a power of attorney for my grandmother. When my grandfather died he left everything to my grandmother so I understand her inheritance tax threshold will go to her.

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Heather Rogers answers: Many people want to protect assets, future or present, from possible claims by a spouse.

When spouses divorce, the assets that are considered in the financial settlement are usually classified as marital assets.

These are assets acquired during the marriage and include property, business interests, housing and pensions, investments and cash.

I will go through the divorce and inheritance rules and then address your specific question.

How are inherited assets treated in a divorce?

Inheritance is often an issue in divorce proceedings. Should a spouse with inherited assets be able to keep them for himself? The answer to this question depends on a number of factors.

– When was the inheritance received?

– Whether or not it was spent and used during the marriage

– What other property does the couple have?

– If there is enough in the pot to divide between them

– Duration of marriage.

Depending on the circumstances, it may be possible to argue that the asset is not a marital asset; in other words, it has not been absorbed into the couple’s assets, and therefore remains outside the pot for splitting.

However, if the couple’s finances are in poor shape and there are very few assets to be divided, the court may consider the inheritance to have been achieved, especially if it was paid into a joint account and is available to both. to use spouses.

What about an inheritance that has not yet passed to the spouse?

The court is unlikely to rule on potential inheritance. After all, finances and wills can change.

Only if the person has recently died and the inheritance is certain and/or due soon may the court consider this appropriate. It must be declared if it is received before the financial settlement is agreed.

How do you protect an inheritance in a divorce?

You can sign either a prenuptial agreement or a postnuptial agreement that can record the assets and wishes of the parties.

Although not legally binding, they are usually approved by the court if all conditions are met.

You can also keep the inheritance separate from other marital assets and not use it during the marriage.

However, you should take care when placing an inheritance in a trust.

If property, such as an inheritance, is placed in a trust and it is deemed that the other party has no claim to it, the court can challenge this under family law legislation.

Legal advice should be sought before considering any such action in relation to trusts.

If you are getting a divorce, always make sure you get a consent order from the court once your financial settlement has been agreed to avoid future claims.

How can your brother protect his inheritance?

Firstly, you are correct that when your grandfather dies, any unused ‘nil rates’ in respect of inheritance tax will be transferred to your grandmother’s estate. See the box below to find out more about how Inheritance Tax works.

In your brother’s case, it sounds like divorce is possible. It is still not clear and therefore the circumstances will depend on when your brother received the inheritance.

He and his wife can get divorced and your grandmother is still alive.

If this was the case then, provided a consent order is obtained from the court, no further claim can be made against your brother if he then inherits.

When it comes to inheriting the lot when your sister has a claim in the divorce, you should consider the following points:

1. The inheritance will be in your estate, which means that any gifts you make to your brother are subject to the seven-year rule.

My previous column on gift and inheritance tax is detailed.

However, an important rule to remember is that if you make gifts during your lifetime, inheritance tax may be payable on them when you die if they were made within seven years of your death.

2. Any gifts you give your brother will likely be considered marital assets if he divorces, so if you give him cash or buy him a car, that will leave him in the same situation as if he had received an inheritance. :

3. Something might happen to you, or you and your brother might fall out.

As for your future options, if your grandmother has left everything to you, a deed of variation in favor of your brother can be executed within two years of your grandmother’s death.

The previous column explains how wills work, but the important point here is that any change in beneficiaries will be considered to be from the original will and not as a gift from you.

However, it is important to be careful that the Deed of Variation is not construed as denying financial assistance to your brother-in-law.

Another option, if your grandmother chooses to do this, is for her to leave your brother’s share in a trust in her will.

This does not guarantee that his wife will not make any claims, especially if she used the trust during their marriage.

However, the “letter of wishes” left in her will may be specific about your grandmother’s own intentions in this matter.

Whether a trust interest will be considered a financial resource and therefore a marital asset in a divorce will depend on a number of factors and is usually a matter for the court to decide.

Your grandmother may also leave a portion of her estate to any children of your brother and his wife, either directly or in trust, or they are entitled to the capital and your brother to the income, although the income is likely to be considered in a divorce;

Trusts can be complicated to administer and tax returns are required. There may also be periodic inheritance tax charges depending on the amount invested and the type of trust used.

In conclusion, there is no way to fully guarantee future legacy protection. You should get advice from an attorney before making any decisions, and of course about creating a trust.