Married Beneficiary - Flexible Will Protects Inheritance
If an intended beneficiary is married or in a de facto relationship, a question sometimes arises "will the relationship last".
Unfortunately, many marriages and relationships fail. A failed marriage/relationship can lead to "leakage" of a share of the estate to the beneficiary's ex spouse (through family law proceedings).
The asset protection benefits of a Flexible Will 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 problems with their wives 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.
|Will||Bill's parents did a Traditional Will. Under the Will, Bill was left everything.||Ben's parent's left Flexible Wills in which they established a trust for Ben.|
|Allocation of Estate||Ben's inheritance merged into and became part of his matrimonial assets.||Ben's inheritance was held in a testamentary trust.|
|Family Law Proceedings||Bill's wife claimed a share of all of the matrimonial assets, including Bill's inheritance. At the time of separation, the total assets were $600,000. Bill's wife received $300,000 (50% of the total assets).||Because Ben's inheritance was in a testamentary trust, Ben argued that it was not available in the divorce. The matrimonial assets were $100,000 and the trust assets were $500,000 (like Bill, the total asset pool was $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 testamentary trust, but there was no guarantee that it would do so. With this in mind, Ben was able to negotiate a settlement out of court under which Ben's wife received 20% of the total assets.|
|Result||Effectively, Bill's wife ended up with half of his inheritance ($250,000). Bill was not happy with this.||Bill's wife ended up with 20% of his inheritance ($100,000). Ben could live with this, particularly when he saw what happened to Bill.|