Daniel Melamed of our Family Law Group speaks to the Globe & Mail about how to divorce-proof your family's wealth

Build, spend, share. That’s the order of things for many prosperous Canadians, who typically work hard for years so they can live well and have money left over for their children.

This desire to share the bounty is now driving an intergenerational transfer of wealth worth an estimated $1-trillion, according to Strategic Insight, a Toronto research firm.

It’s also causing anxiety among some high-net-worth Canadians, however, whose adult children are married or living with a common-law partner.

A survey last year by Mississauga-based Investment Planning Counsel Inc. underlined this anxiety. Of the 400 affluent Canadians polled, close to 30 per cent said they didn’t trust their daughters- and sons-in-law to manage their heirs’ inheritance.

While the value of an inheritance or gift received during marriage is generally excluded when assets are being equalized between divorcing partners, income from these assets is not. For instance, rental income from inherited real estate or investment income from a portfolio built with inherited money would be considered part of a married couple’s joint assets.

This is where proper wording in a will or deed of gift comes into play, says Daniel Melamed, a family lawyer and partner at Torkin Manes LLP in Toronto.

One of the most effective ways to safeguard family wealth in case an heir gets divorced in the future is with a marriage contract, known commonly as a prenuptial agreement, says Mr. Melamed.

These agreements, which can set conditions around inheritances, family heirlooms or a family business and must be signed by both parties, are not easy to negotiate, he says. That’s why it’s a good idea to start discussing the need for a prenup during the early stages of a child’s serious relationship.

This article was originally published in the Globe & Mail. To read the complete article, please visit the Globe & Mail online.