One of the most common questions I get asked is: how do I ensure my son-in-law or my daughter-in-law doesn't inherit my estate.
The answer to this is at first, very simple: in-laws have no right of inheritance. This means that if you die without a Will, in-laws do not inherit. Similarly, if you die with a Will, unless you are specifically gifting to your in-law, he/she has no right of inheritance.
I say that the answer to this is at first simple, because it is. But it gets complicated by how your child(ren) manage and use their inheritance. If you child keeps what they inherit from you separate, in a separate account and does not co-mingle it with money held with a spouse, then the inheritance belongs only to your child and does not form part of what is called "matrimonial property". Matrimonial property is property that is used for the 'family' and is divided 50/50 between married spouses when there is a breakdown of the relationship.**
If, however, your child places their inheritance in a joint bank account, or uses it to pay off the mortgage on the family home, then the inheritance becomes matrimonial property and 50% becomes the property of your son-in-law or daughter-in-law. Similarly, if your child inherits a cottage from you and they use the cottage for family vacations, the cottage may be considered matrimonial property and could be apportioned to your in-law in the event of marital breakdown.
If your child uses their inheritance as collateral for a joint debt with their spouse, or to secure a debt of their spouse, that inheritance theoretically becomes matrimonial property that benefits your child and his/her spouse.
Finally, if your child has a Will it is very likely that he/she will gift their entire estate to their spouse upon death (if they don't, the courts will apportion some or all of the estate to the spouse to provide that spouse with "adequate maintenance and support"). If your child does not have a Will, then the law provides that either all of the estate or a large portion of the estate will go to their spouse. See our Blog What Happens if You Don't Have a Will - Part 3 What Happens to Your Property Unless there is a breakdown of the relationship or there is a pre-nuptial or post-nuptial agreement in place, there is a good chance that your son-in-law or daughter-in-law will inherit at least portion of your estate indirectly.
The next thought that some people have is to write a Will and put directions or stipulations on how a gift can be used by their children or conditions requiring a child to meet before they can inherit. For example: stipulating that a child is to separate or divorce from their spouse in order to inherit their share, or that a child have a post-nuptial agreement in place before they receive their gift. Or stipulating that after the child dies, their inheritance from you reverts back to your estate and then goes to one of your other children. But this runs a fowl of a rule in law called the Rule Against Perpetuities and amounts to what we call "dead hand control". Dead hand control is frowned upon in law as you cannot give a gift and then direct how it is used after the fact. You also cannot give a gift and have so many conditions on it that it makes it difficult to determine with utmost certainty who actually owns the property. I know, I know, this sounds complex. But the take away is: you cannot give a gift with the requirement that the recipient meet certain requirements in order for them to continue to keep the gift.
One option to mitigate the amount your in-law might receive from your estate is to create a trust in your Will to give portions of the gift to your child on, for instance, a monthly basis until death and then upon their death if there is any trust property remaining, their children or some other person will receive the balance of the funds held in trust. There are some issues with this, the first is that any person above the age of majority can apply to the court to have the entire trust property gifted to them right away (most people aren't aware of this option and therefore don't make such an application). The second is, if your child uses the trust funds for the benefit of their "family" then the property becomes designated as matrimonial property and is divisible between your child and their spouse. The third is that, depending on how the trust is worded, it may offend the Rule Against Perpetuities that was discussed above and be declared entirely void by the courts.
If you have issues with your in-laws, as can be gleaned from above, your best option to prevent your son-in-law or daughter-in-law from indirectly inheriting your estate is to discuss with your child (in consultation with estate AND family law lawyers in the province/territory in which your child lives) different techniques to keep the property separate and apart from property used to benefit their family. Your child could also make a Mutual Will and Trust Declaration with their spouse (a Mutual Will is not your standard run of the mill Will, it is irrevocable upon the death of one of the spouses and has several other unique characteristics/requirements) or enter into a post-nuptial agreement with their spouse to keep the property separate and apart. All of these things require Independent Legal Advice for both your child and their spouse because they deal with matrimonial property and are therefore expensive endeavors and techniques. If you are worried about your in-law benefiting from a couple thousand dollars or less, then be okay with that occurring as the costs of meeting with lawyers, drafting documents and getting independent legal advice for both your child and their spouse will easily cost in the tens of thousands of dollars. If, however, you are concerned about larger sums of money, then it is worth having your child discuss with qualified legal professionals different options and techniques to keep the inherited property separate and apart.
**It should be noted that several jurisdictions are expanding the property division rules of married spouses to common law partnerships (such as British Columbia) so some of these above rules may apply to your child even if they are not married but are in a common law relationship. Conversely, other jurisdictions, such as Ontario, have not expanded spousal division rights to common law relationships.
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