Unless I am missing something, this is relatively easy to resolve.
Your wife’s parents divide the property into 6.
Your wife gets three shares
her sister gets one share
the sister’s children get two shares which are held in trust until they reached age 18. The trustee could be someone who is trusted such as your wife.
That way, only 1/6 of the property would belong to your sister-in-law with the only proportion taken into account for benefits being that 1/6th and also being the only proportion which could potentially pass to her husband.
There is no legal way of inheriting something and not having it taken into account for benefits purposes.
Can I clarify anything for you?
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Even if there is a document/trust deed which says that the money is not available to the child until age 25, there is old caselaw, Saunders v Vautier which says that as soon as a child is of majority (aged 18) and provided they have full mental capacity, they can bring a trust to an end. If there are a several beneficiaries of the same trust, they must all agree.
If 2 beneficiaries have been left 50% each, then that is 2 trusts.
The property is sold before the youngest child reaches 18, then the money can be held on trust by anyone who is trustworthy but the money should go into a separate bank account so that cannot be “mixed” with any other money. The title of the account should also be “trust account for ABC”, so that of the trustee is holding the money goes bankrupt, then the trustee in bankruptcy cannot touch that money is being one of the bankrupt’s assets.