The Growing Role of Intergenerational Wealth in Modern Divorce

Divorce has always been a major financial event, but today’s economic pressures, high housing costs, variable incomes, childcare responsibilities and longer lives, mean that settlements now involve a far broader set of financial considerations than in the past. A clear trend is emerging - intergenerational wealth, whether gifts, loans, equity release, early inheritance and wider family resources, is increasingly shaping how settlements are negotiated and how clients rebuild their lives.

This shift brings family law and estate planning closer together than ever before.

Divorce finances now involve many variables

While every case is different, modern divorces typically involve 20 or more financial and personal variables that intersect in different ways. These can include:

• housing needs and affordability

• earning capacity and employment stability

• childcare demands and future costs

• pensions and long-term financial security

• debts and liabilities

• contributions during the marriage

• the effects of future relationships

• the practical realities of mortgage capacity.

Each variable can influence the others. This is why two divorces with similar assets can still produce very different outcomes: it is the combination, not the isolated factor, that drives the final settlement. In many cases, these variables reveal a financial gap, particularly around housing, that the marital assets alone cannot fill.

Intergenerational support is increasingly filling the gap

Parents or extended family members are now stepping in more often to help divorcing individuals rehouse or achieve stability.

• Gifts increase during major life events, including divorce - lifetime gifts (“inter vivos transfers”) are now more common during periods of relationship breakdown.

• Family wealth is now central to homeownership - Bristol University research indicates that gifted deposits, equity release and early inheritance are becoming a key part of how adults enter or remain in the property market. So, a client’s financial recovery after divorce often depends as much on their parents’ resources and intentions as on the marital assets themselves.

Divorce and estate planning crossover

Once parental money enters the divorce conversation, important legal and practical issues arise, such as :-

• Was previous family support a gift or a loan?

• Should new support be documented or ring-fenced?

• Does any inheritance already received need to be characterised?

• Should parents be advised to review their own wills or structures before helping?

• Do the divorcing parties need to update wills, LPAs or pension nominations?

Conversations with parents often need to happen earlier

As intergenerational support becomes more common, families often benefit from early, structured conversations. This is particularly important when:

• parents are older or considering their own estate planning

• the scale or timing of help affects their financial security

• family assets are tied up in trusts, property or investments

• there is a desire to prevent unintended enrichment of an ex-spouse.

Early dialogue:

• clarifies what support (if any) is realistic

• prevents assumptions by the divorcing party

• allows legal structures to be put in place if needed

• ensures parents’ own estate plans remain intact.

Estate-planning issues now commonly arise alongside divorce

Estate planning is becoming more common as part of divorce and achieving more stable and predictable outcomes. As a result, our family lawyers and estate-planning practitioners work side by side to ensure that settlements are both workable today and aligned with the client’s long-term financial and family landscape.