How do I cut my troublesome sister-in-law out of grandma’s inheritance?

My grandmother is 95 years old, healthy and mentally sound. Sadly her mother passed away, so her grandmother’s wish is to leave 50 percent of her estate to me and her brother respectively.

My brother is married to his wife, but she has considerable mental health problems and their marriage is often unstable.

To avoid the possibility of his wife ever being entitled to a portion of this inheritance in the future, we discussed the option of my grandmother leaving it 100 percent to me.

My brother and I have a very good and close relationship. That way the money will be kept safe under my control. And when the time comes, I plan to use that money to give my brother what he needs, like a car and vacation.

My question is, if I spend a lot of money on “gifts” for my brother, will there be any tax implications?

Other relevant information is that I have my grandmother’s power of attorney. I understand that when my grandfather passed away, he left everything to his grandmother, so the inheritance tax threshold would be hers.

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Heather Rogers answers: Many people want to protect their future or current assets from potential claims from their spouse.

When a couple is divorcing, the assets that are subject to a financial settlement are those that would normally be classified as marital assets.

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

After reviewing the rules on divorce and inheritance, I’ll move on to specific questions.

How are inherited assets handled in a divorce?

Inheritance is often an issue during divorce. Should a spouse with an inheritance keep it as their own? The answer to this question depends on many factors.

・When inheritance is received

– Whether it was spent and used during the marriage

– What other assets does the couple have

– If the pot is large enough for two people to share

– Length of marriage.

In some circumstances, it may be possible to argue that the property is not marital property. In other words, it has not been absorbed into the marital assets and thus remains ineligible for the split.

However, if the couple are in poor financial condition and have few assets to divide, especially if they are paid into a joint account and both are available, the inheritance may be considered contested by the courts. I have. Used by spouse.

What happens to inherited property that has not yet been inherited by a spouse?

Courts are unlikely to rule on potential inheritance. After all, finances and wills can change.

Courts will consider it relevant only if the person has recently died and the inheritance has been established and/or the inheritance is imminent. If received before a financial settlement is agreed, it must be declared.

How can I protect my inheritance in the event of a divorce?

A pre- or post-nuptial agreement can be drawn up to record the assets and wishes of the parties.

Although not legally binding, they are generally upheld by courts if all conditions are met.

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

However, caution should be exercised when entrusting assets to a trust.

If property such as inherited property received is entrusted and this is deemed to be to avoid the other party’s claims against it, the court may challenge this under the laws of family law.

Legal advice should be sought before considering any such action with respect to a trust.

If you are divorcing, be sure to obtain a consent order from the court after agreeing to a financial settlement to avoid future claims.

How can your brother protect his legacy?

First, when your grandfather dies, you are correct that any unused “zero tax bracket” for inheritance tax goes to your grandmother’s estate. For more information on how inheritance tax works, see the box below.

In the case of his brother, there is also the possibility of divorce. It’s not clear yet, so it depends on when the siblings received their inheritance.

He and his wife may get divorced and your grandmother may still be alive.

In that case, if a consent order has been obtained from the court, even if the brother inherits, no further claim can be made.

Regarding the inheritance when the sister-in-law has inheritance rights due to divorce, the following points need to be considered.

1. Inheritance is in your estate. This means that all gifts you give your siblings fall under the 7-year rule.

In my last column on gift and inheritance tax, I went into more detail about that.

However, an important rule to remember is that if you make a gift while you are alive, and if you make the gift within seven years of the date of your death, you may be subject to inheritance tax on your death.

2. Any gifts you give your brother will be considered marital property if he divorces, and giving cash or buying a car puts him in the same situation as if he had inherited himself. will be

3. Something could happen to you or you and your siblings might fall apart.

For further options if your grandmother has left everything up to you, a change deed can be made in your brother’s favor within two years of your grandmother’s death.

In my previous column, I explained how change deeds work, but the key issue here is that they mean that changes to beneficiaries are considered to be due to the original will and not as a gift from you. .

However, it is important to note that a change deed is not considered a denial of financial relief to the brother’s wife.

Another option, should your grandmother choose to do so, is to leave your brother’s share to him as a trust by way of her will.

This does not guarantee that no claim will be made by the wife, especially if she is in the trust during the marriage.

However, the “letter of wishes” left with her will may specifically state your grandmother’s own intentions on this matter.

Whether or not trust interests are considered financial resources, or marital property, in a divorce depends on a variety of factors and is usually decided by a court.

Your grandmother may leave to your siblings’ children either in full or in trust, or give them equity rights and give your siblings income rights and part of the estate, but , whose income is most likely to be considered. divorce.

Trusts can be complex to administer and require tax returns. In addition, depending on the investment amount and the type of trust used, inheritance tax may occur periodically.

In conclusion, there is no way to fully guarantee future inheritance protection. Before making any decision, you should seek the advice of an attorney, especially regarding setting up a trust.