PROTECTING THE CHILDREN’S INHERITANCE IF A PARENT REMARRIES
It is estimated that up to 70% of the population of England & Wales do not have a valid Will. This is an alarming statistic when one considers how much can be achieved by making even a basic Will. At the heart of the decision to make a Will is the fact that the person doing so (the Testator) is rightly deciding who should inherit the wealth which they have accumulated in their lifetime and avoiding the need for the Government’s Rules of Intestacy to determine how those assets are distributed on their death.
For married couples the most common decision is to have ‘Mirrored Wills’ which each state the same wishes on their deaths. This is normally that all assets will pass to the surviving Spouse on the first death and then, on the second death, the assets will be divided equally between all of their children. In most cases this proves to be the ideal solution and the couple’s wishes are carried out in accordance with their Wills. However, problems can arise if, following the first death or after a divorce, a parent remarries.
In the case of divorce, once a full financial settlement has been agreed, spouses will not inherit from each other unless a specific Item or cash amount has been left as a “Gift”. This is highly unlikely as the Mirrored Wills will state that the spouse will receive the “Residue” of the estate which is what remains after any specific Gifts have been paid. Both Wills will still be valid and their children will now become the main beneficiaries. In each case the assets covered by the Wills will be those which each of the divorced parents now owns individually. The situation is slightly different when one spouse dies. As stated in the Mirrored Wills the assets go to the surviving spouse who will now own all of their combined wealth. As in the divorce example above, the children are now the main beneficiaries of the survivor’s Will.
If both divorced parents in the one case, and the surviving widowed spouse in the other, do not remarry then the original Wills remain valid. However, should any of them remarry problems can occur as marriage revokes an existing Will and therefore the newly-married parent does not have a valid Will. There is now an urgent need for them to make a new Will as if they should die before doing so their estate will be distributed in accordance with the Rules of Intestacy. These state that the first £250,000 of a deceased, married person’s estate passes to the spouse if they had children. If there are no children the spouse will inherit the first £450,000 of the estate. As many second marriages take place later in life there are often no children so many spouses will inherit the higher figure of £450,000. So, in the examples above, if no new Will is made, up to £450,000, which would have passed to the children of the original marriage while the original Will was valid, will now pass to the new spouse. The actual amount which passes to a new spouse is likely to be higher where a surviving parent remarries because, as stated earlier, they will have inherited all of the assets from the previous marriage, whereas a divorced parent will probably have received only half of the total assets in the financial settlement.
The simple solution to the problem is for divorced or widowed parents to be aware that any existing Will becomes invalid when they remarry and to make a new one which includes their new spouse and the children from the previous marriage as beneficiaries. However, it is possible for parents to ensure that part of their estate will always pass to their children by making Property Protection Wills. To do this ownership of their property is split 50/50 so they own it as ‘Tenants in Common’. This allows the half of the home owned by the first spouse to die to be placed into a Trust, the terms of which allow the surviving spouse to remain in the property until their death. If the surviving spouse should remarry the half of the house in the Trust is protected for the beneficiaries i.e. the children, and can never pass to the new spouse.
As with any inheritance issue individual situations can vary widely so it is important to seek assistance from an Estate Planning professional who will be able to provide advice on your particular circumstances and offer a complete range of solutions to any concerns you may have. The information above has been provided by our Estate Planning partner in North East England, George Maddox, of Heritage Legal & Financial Ltd. If you would like to arrange an appointment with George please call us on 0800 690 6449 or ring him direct on 07768 244211 quoting the reference REDKITE.