How to protect your children’s inheritance
It’s natural for us to want to provide for our children after we have gone. Even if we haven’t amassed a vast fortune that would qualify us for inclusion in The Sunday Times Rich List, most of us will still want our children to benefit from all our hard work.
To ensure that our wishes are carried out the conscientious among us make a will specifying precisely how our assets are to be distributed on our death. However, even the best laid plans go awry and it can come as a shock when people discover that making a will is no guarantee that our children will inherit.
There are a number of factors that could upset these plans, with the result that our wealth could end up in the hands of people who are not our own flesh and blood. This risk has grown greater with the rise of second and third marriages and the complexities of blended families.
In this brief article we look at what can go wrong and what can be done to protect your children’s inheritance.
Are ‘mirror wills’ the answer?
Couples often make ‘mirror wills’. This is where the testamentary provisions of two wills ‘mirror’ each other. Typically each person will leave their estate to the other, with similar stipulations in both wills about what should happen when the survivor passes away.
For example, a wife leaves her estate to her husband and the husband leaves his estate to his wife. Both wills specify that upon the death of the survivor, the combined estate shall pass to their children.
That all sounds straightforward. What could possibly go wrong?
Mirror wills can be changed
Underpinning English law is the principle of testamentary freedom. In simple terms this means we are free to leave our estate to whoever we wish. As a result we can revoke our will whenever we want. So just because you and your spouse or partner have made mirror wills, it doesn’t mean that your other half wont change their mind after you have passed away. The terms of the mirror will are not binding upon them. You may have left your estate to them on the basis that they will ultimately benefit your children, but there is no obligation on them to do so. Circumstances change. People change. Wills change.
Our inheritance disputes team are contacted on a daily basis by beneficiaries who have been written out of wills. They often allege foul play, especially where a will has been changed by an elderly person in favour of someone who would not ordinarily be expected to inherit. Your spouse or partner could therefore find themselves under pressure later in life to go against your agreed plans. They may change their will to benefit a third party rather than your children and in most cases there is nothing that can be done to prevent it.
In the husband and wife scenario above, what would happen if the surviving spouse remarries? They are likely to want to make sure their new spouse is financially provided for by making a new will in their favour. This could result in the assets of your estate being passed to the new spouse. Once they inherit they are then free to dispose of your assets however they wish.
If the new spouse has children from an earlier relationship (or they have had more children with your former spouse) the new spouse may well wish to provide for their children’s inheritance. How will this impact upon the money that had been intended for your children?
Marriage revokes a will
Even if your other half does not intend to make a new will, if they remarry the ‘mirror will’ they made with you is automatically revoked by that marriage. A new will must therefore be prepared. If a new will isn’t made then the intestacy rules will apply.
The operation of the intestacy rules may act against the wishes specified in your will. In particular the intestacy rules make significant financial provision for the new spouse. Again, your children could lose out as a result.
The risk of an Inheritance Act claim
There is also the Inheritance Act to consider. If financial provision is not made for the new spouse in any subsequent will then that spouse can make a claim for a greater share. Indeed this is a risk even if there is no remarriage. Someone who has merely cohabited for 2 years or more can make an Inheritance Act claim.
The legal rights of step-children compared to adopted children
The intestacy rules make a distinction between the legal rights of step-children and those of adopted children. While a child who has been adopted is entitled to benefit from their adopted parent’s intestate estate, a step-child has no such legal entitlement.
So if your estate ends up in the hands of your children’s step-parent and that step parent doesn’t make a will, then the intestacy rules will exclude your children from benefiting upon their death unless they have been formally adopted.
How to protect your children’s inheritance
These are all examples of how your children might not end up receiving the inheritance you had intended for them. So, how can you protect your children’s inheritance?
It will be evident from this brief overview that inheritance law can be a minefield. Family structures and relationships play a key role and specialist legal advice should be taken on a case-by-case basis in order to gain maximum protection.
By consulting with a solicitor who is experienced in dealing with these issues you will be able to identify the strategies that are available to deliver the best chance of your intentions being carried out following your death.
Among the options available is a discretionary trust. This enables assets to be placed in trust upon your death to benefit your chosen beneficiaries at the discretion of your trustees. This has the effect of enabling your trustees to control what happens to your estate and preventing those assets from passing to unspecified beneficiaries.
Another way to protect your children’s inheritance is to give your spouse or partner a ‘life interest’. This enables them to benefit from the income your estate generates during their lifetime or keep a roof over their head, but upon their death the assets pass direct to your beneficiaries, rather than passing under your former spouse’s will. So even if they change their will or it is revoked, your beneficiaries won’t miss out.
One word of warning however. It is important to ensure that your will does not materially increase the likelihood of an Inheritance Act claim being made against your estate. This risk and the Inheritance Tax implications therefore need to be considered by a specialist solicitor alongside the above options.
How we can help you
We have solicitors who are experts in wills and trusts and can advise you on how to protect your children’s inheritance. We also have extensive experience in the highly specialised field of inheritance disputes, representing people on a national basis. This allows us to plan your estate in a way that minimises the risk of an Inheritance Act claim being made.
We have offices in Devon and Somerset. For an estimate of the cost of a consultation and the preparation of a will designed to protect your children’s inheritance contact us at [email protected] or call 0808 139 1606