Pattie Lovett-Reid: The risks of adult children on family allowances
Traditionally, an allowance was used by a parent to motivate a child to do chores or learn more about money management. However, there are many parents today who maintain allowances for their adult children. But how is this allowance affected if their children go through a divorce?
At Shulman Law Firm, they are seeing a number of parents who give their adult children allowances for a whole host of reasons, and with that comes the unintended risks of giving money to their children who are married or living together. TD estimates one in four millennials lean on their parents or grandparents for financial support.
Shulman Law has the following three strategies to ensure your money stay with your children in the event of a marital breakdown:
- Create a marriage contract which explicitly excludes this ‘allowance’ money from being divided if the couple ends their relationship
- If living together, set up the same boundaries via a co-habitation agreement
- Parents could set up a properly-structured trust account for the child
In some provinces, the law allows you to keep the value of some property that you have at the end of your marriage for yourself. This property is called “excluded property.” It includes:
- Gifts received during your marriage from someone other than your spouse
- Property inherited during your marriage
- Money that you received from an insurance company because someone has died, and;
- Money that you received or that you have a right to receive as a result of a personal injury, like a car accident
Parents want to place the best interests of their children first, but Shulman Law wants families to be aware of the risks involved prepare for the unexpected.