How can I protect my children’s inheritance?
Protecting your inheritance for future generations is commonly referred to as “bloodline planning”.
Bloodline planning is ensuring that your assets reach your children, grandchildren and other relatives, rather than ending up in the wrong hands.
When assets are distributed to beneficiaries “absolutely” (i.e. they receive cash, property or other assets as a direct lump sum payment), so much can be lost. These assets are then considered to be part of the beneficiary’s estate and would be at risk of attack from any future divorce settlements, creditors and taxation.
The strategic use of trusts can ensure that your children and grandchildren are able to benefit completely from the inheritance you want them to receive and at the same time, protect the family home and other assets from being lost to the costs of long-term care. Trusts can also help avoid what is known as “generational inheritance tax”.
Without the correct bloodline planning…
Some, or all, of your children’s or grandchildren’s (bloodline’s) inheritance could be lost.
Assets not protected by a trust face attack from…
- The divorce or separation settlements of future generations where the courts may award a share of the inheritance you have left, to a former spouse/partner.
- Creditors or bankruptcy claims. Either an unwise investment or a business venture that collapses or even gambling or other addictions may lead to your assets being lost by future generations.
- Further inheritance tax bills. Otherwise known as “generational IHT” where the taxman can receive up to 64% of your wealth within two generations and nearly 80% within three generations.
- Distributing assets absolutely to beneficiaries exposes those assets to risk.