Marrying for a second time, after divorce or bereavement, marks the start of a wonderful new chapter in life and you and your new partner will be looking forward to a long and happy future together.
However, when it comes to making Wills, you may feel you are stuck between a rock and hard place – how can you provide for your new spouse (and any children from the marriage) while also ensuring that the children of your previous marriage receive an inheritance from you?
Many people find it hard to raise these issues with their new partner, as they feel it indicates a lack of trust on their part. However, it is important that you discuss these issues and make appropriate arrangements in your Wills, so as to minimise the risk of disputes later. There are a number of possible pitfalls, including:
- Marriage revokes any existing Will. If you remarry and don’t make a new Will you are ‘intestate’ and the rules of intestacy will determine how your assets are distributed between your new spouse and your children. This may not be what you want (and may not be tax-effective for the family)
- If you decide to make a Will leaving everything to your new spouse, outright, you will be relying on your surviving partner to divide the assets fairly on their own death, as between your respective children (or other family members). However, the survivor is free to change his or her Will at any time and it is possible that he/she may marry again and benefit a new spouse/partner, thus cutting out your children. It is possible that the bulk of the assets will have been spent by the survivor (eg on care home fees) thus leaving nothing for your children.
- Any assets you own jointly with your new spouse as joint tenants will pass automatically to that spouse on your death, no matter what your Will says.
- Although you are free to leave your assets as you wish, the Inheritance (Provision for Family and Dependants) Act 1975 gives certain family members and dependants the right to make a claim against your estate, if sufficient provision has not been made for them.
- If you were widowed before your remarriage, your estate may be able to claim a transfer of unused inheritance tax ‘nil rate band’ on your own death. It is important that your Will is drafted with this in mind, so as to ensure that this valuable tax allowance (potentially worth £130,000) is not wasted.
What is the answer? Is there a way to ensure that my new spouse is provided with enough for his/her needs, while preserving an inheritance for my own children?
There is no one size fits all answer for complex family situations, as there are many variables to be taken into account, including the extent and nature of the family’s assets, the age and health of the respective spouses, pension arrangements and the likelihood of children inheriting from elsewhere in the extended family.
However, in most cases flexibility and security can be achieved by the use of trusts in your Wills. There are two main types of trust that we recommend in these circumstances – flexible life interest trusts and discretionary trusts. Both types of trust would allow the survivor to continue living in the family home for as long as necessary (which is usually the main issue of concern for couples) and would preserve the underlying assets for the benefit of children. Life assurance (written on trust) may also play a part, if affordable.
In summary, second marriage situations are rarely straightforward, when it comes to making Wills. If there is ever an occasion for specialist legal advice, this is it.
If you think Second Marriages & New Families may affect you and would like further advice, please contact any member of our Tax, Trusts and Estates team: