Parents are being put off inheritance tax planning because they fear their children’s marriages will fail, a report has suggested.

The threat of divorce is deterring the older generations from providing financial help or an inheritance to their married kids, Investec Wealth & Investment found, as
the January peak season for divorce arrives.

Investec reported seeing a rise in the number of clients enquiring about measures to mitigate the risk of assets leaving the family unit in the event that their children’s marriages hit the buffers.

Its research showed that one in six (17%) parents have been favouring small financial gifts rather than a lump sum to help with day-to-day living, while 14% have decided to skip a generation and leave assets to their grandchildren.

One in seven (13%) said they were considering a discretionary trust, which can be a useful means to protect family wealth from future divorce within a family.

Some 12% of parents surveyed by Investec Wealth & Investment said their children’s marriages had already broken down and a further 14% had little or no confidence they would last a lifetime.

They feared that a permanent split would result in assets leaving the immediate family.

In addition to the risk of divorce, the study shows that parents are often reluctant to pass down their assets because they question the financial competence of their children’s married partners.

More than four in ten (42%) said they had “limited confidence” in the ability of their sons and daughters-in-law to manage financial affairs.

One in five (20%) parents were worried that an inheritance will be wasted by their children on unnecessary extravagances such as expensive holidays and14% said it will reduce their children’s incentive to work hard and earn their own money. Also, 13% feared that too little would be left for grandchildren and further generations.

Simon Bashorun, Financial Planning team leader, Investec Wealth & Investment, said: “In our experience parents may disapprove of their children’s choice of partner but can be reluctant to interfere in case they cause a family rift. But with divorce rates as they are in the UK, we are seeing increasing numbers of parents looking to protect wealth from leaving the immediate family, particularly if they’re pessimistic about the state of their children’s marriages. This often results in parents favouring small financial gifts over lump sums and in some cases setting up discretionary trusts.”