Protecting Family Wealth: Prenups, Trusts, and Parental Precautions

Inheriting Wealth, Not In-Laws: How Parents Safeguard Assets for Their Children

Boomers, the wealthiest generation, are increasingly taking proactive steps to ensure their hard-earned assets stay within the family, even after their children marry.
Driven by rising divorce rates and “Bank of Mum and Dad” contributions, parents are utilising legal tools like prenups (Binding Financial Agreements or BFA’s) and trusts to shield their legacies from potential outsiders.

What are the benefits of Prenups?

Binding Financial Agreements (PreNups) are great for early Intervention and less messy breakups:
Family lawyers report a surge in prenuptial agreements (BFAs) initiated by concerned parents.

Why a Binding Financial Agreement will help?

BFAs stipulate asset division in case of divorce, protecting inheritances received during the marriage.
In a recent article published by The Australian, “In-laws get to inherit? Parents say ‘nup'”, by Ellie Dudley, our very own Principal & Family Lawyer, Chris Dimock, emphasizes the growing acceptance of prenups and their reduced legal vulnerability compared to the past.
Chris Dimock said:

“It is not uncommon for the parents in a situation where there are children getting married to say to their son or daughter, ‘Look, we would feel more comfortable about the match if you were to enter into a prenup with your partner’.
“The prenup would provide that if the couple were to go their separate ways, then if during the relationship one of them received an inheritance, that inheritance would remain the property of the party who received it.”

Mr Dimock said there was

“no such thing as a water-tight BFA” but it was always better to have one than not, especially if you were the financially stronger party

Prenups were more common now than ever, he said, because laws regarding them had settled since they were first introduced more than 20 years ago.
“When they were first introduced, there was a raft of litigation where people tried to challenge the BFA,” Mr Dimock said. “Things have settled down. Successful applications to set aside
BFAs are certainly less common. So we, as family lawyers, are saying to our clients that there’s a greater level of protection in these BFA’s than when they existed even five
years ago.

Testamentary Trusts: Securing the Future for Generations

In the article, Andrew Zbik, a financial planner, established a trust for his children, safeguarding inheritances from potential external influences. Trusts grant control over asset distribution, preventing unwanted claims by spouses or partners. Essentially a trusts purpose is to protect family wealth.
The key is communication and openness. Documenting financial gifts explicitly within prenups (BFA’s) to ensure their exclusion from marital assets.
Open dialogue with children can ease anxieties and address concerns about prenuptial discussions.
Seeking professional legal advice from qualified estate planning or family law specialists is crucial for effective asset protection.
While safeguarding family wealth requires comprehensive planning, parents can navigate this territory effectively through proactive measures like prenups, trusts, and open communication. By prioritizing their children’s future and employing the right legal tools, they can ensure their legacy remains within the family for generations to come.