Laura Cowan

Second marriages often create blended families that giving rise to complex estate planning provisions. One of the first steps is ensuring that you have a valid will that clearly outlines how you want your estate to be distributed when you die.  Taking professional advice on this can be vital in making sure that the right measures are put in place.

If you are remarrying or entering into a second civil partnership any existing wills become null and void, unless you have made a new will ‘in contemplation of marriage’ (and you specify that in the will). If you die, not having made a new will after marriage/civil partnership, you will be deemed to have died intestate (without a will).

Intestacy rules apply if no new will is made after marriage/civil partnership

Intestacy rules are complex. You can read about them in full on our web page.  In England and Wales, a set of statutory intestacy rules will determine exactly how your estate will be divided if you die. The first £322,000 of assets held in your sole name will go to your spouse/civil partner. Any children will inherit half of the rest of the estate (assets for children under 18 years old will be held in trust until they reach that age), and the other half will go to your spouse or civil partner.

Assets held in joint names will be inherited by your spouse or civil partner. For example, if your property is held in joint names, your children will not inherit a share of it. If assets held in your sole name are worth less than £322,000, they will all go to your spouse/civil partner. (Scotland has a different set of rules.)

This is probably not what you want to happen, so a new will is needed if you want to provide for your children, including those from a previous relationship, whilst still protecting each other.

Risks of mirror wills

One way to provide for your whole family is to prepare mirror wills, where the whole estate is left to the surviving spouse or civil partner on the first death and then to any children upon the second death.  However, mirror wills are just an understanding between spouses/civil partners at the time they are made – they are not a contract. There is no guarantee that the surviving spouse/civil partner would not make a new will leaving the whole estate to their own chosen beneficiaries, cutting out the children of the spouse/civil partner who died first. This might include property that the deceased spouse/civil partner had previously owned and lived in with their family and had been promised to their children, or assets that the deceased had intended should be retained by their family.

However, there is another way to ensure that your children benefit from the value of property as you wish.

Life interest trust

A life interest trust (sometimes known as a possession trust) can be established.  In this trust, you leave the percentage of the property that you own to your children when you die but give your spouse or civil partner the right to continue to live in it for their lifetime, as if it were their own. Your share of the house would then pass to your children upon the death of your spouse/civil partner.

Tenants in common

To do this, you would need to own your house as ‘tenants in common’ rather than ‘joint tenants’, where the property is owned in equal shares by the owners.  As tenants in common, you each own a percentage of the house (the percentage can be whatever you agree), and this percentage can be left to your children (or whoever you want) when you die, rather than automatically passing to the joint owner.

Additionally, this arrangement can provide protection against residential care home fees. Should a surviving spouse or civil partner require residential care later in life, only the percentage of the property they own can be assessed during means testing, and only their percentage can be used to pay any fees.

Furthermore, this arrangement can assist in managing inheritance tax (IHT). If the percentage of the property value, plus the value of any other inheritance passed to children upon the first death is below the IHT threshold, there will be no IHT liability. It is then possible that when they inherit from the second death, it may also be below the IHT threshold.

How can we help?

If you need help and advice regarding making a will upon second marriage or civil partnership, or any aspect of estate planning to ensure the protection of your family’s future, contact our experts now. They have many years’ experience in a wide range of situations and will be able to offer knowledgeable and professional guidance and advice.

Author: Laura Cowan, head of Graysons’ private client team.