As we live longer, more adults are marrying a second or third time. Divorce among the over-60s, otherwise known as ‘Silver Splitters’, has risen by a third in the past decade. While most adult children are happy that their parents have companionship in old age, they may have worries over their potential inheritance.
Gail Hall, Wills and Probate lawyer at Warners Solicitors in Tonbridge advises on solutions in your will to protect your children’s inheritance.
How can I protect my children’s inheritance?
Ultimately, most of us want our children to inherit our assets at some point in the future. But if we have a partner or spouse it is also usual to want them to benefit first, for the rest of their life, before assets are passed to the children.
Picture a scenario, though, where at some time after your death, your partner or spouse remarries or starts a new relationship and possibly has more children. Or, a situation where your children and your current partner become estranged. How do you ensure that your children’s inheritance is protected in the longer term?
If you make a will leaving everything outright to your spouse or partner on your death, there is a possibility that your children may not receive anything. There is nothing to stop him or her from disinheriting them. Even if you have both made identical wills which leave everything to the children on the second death, he or she could later change their will if they wish to.
If your spouse/partner does not have a will or remarries and does not make a new will, their estate will be distributed according to the intestacy rules. Under the intestacy rules, stepchildren are not provided for, so children from a previous relationship could lose out. A new relationship could also make your partner’s estate vulnerable to a dependency claim after their death.
Life interest trust in your will
One solution is to have a life interest trust written into your will. The trust is set up to provide for your partner or spouse for the remainder of their lifetime, but ensures that the capital ultimately passes to the children.
While your spouse or partner is alive they are entitled to the income from the assets held in trust, but not the capital. After their death the trust assets pass to the children outright or sometimes into a further trust for the children’s benefit.
If there is a concern that your partner might need access to some capital during their lifetime, powers can be included in the trust to allow the trustees to consider any such requirement and make payments if they think appropriate. It is important to choose the trustees carefully to ensure some neutrality and avoid a conflict of interest.
Discretionary trust in your will
A flexible alternative to a life interest trust is a discretionary trust. This can provide additional options for trustees, for example, allowing them to benefit both spouse and children at the same time. The will should be supported by a letter of wishes to the trustees setting out guidance as to how they should consider using their discretion. It is crucial, in respect of both life interest and discretionary trust wills, that jointly owned assets are reviewed at the time the will is drafted and, where necessary, a document is signed to ‘sever’ the ownership of these assets. This ensures that each person’s half-share of joint property or other assets will pass into the trust, rather than automatically to the joint owner on death.
Leave gifts to your children on the first death
If there are adequate assets, particularly where your spouse or partner is sufficiently financially secure without requiring your entire estate, gifts to children may be considered on the first death. You could even put your gift into trust for your children, particularly if they are minors. This can have inheritance tax consequences and advice should be taken on your individual situation.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice, and the law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.