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Estate Planning for Stepfamilies and Blended Families

Estate Planning for Stepfamilies and Blended Families

Estate Planning for Stepfamilies and Blended Families

Estate Planning for Stepfamilies and Blended Families

Four out of every ten British marriages will come to an end before their twentieth anniversary, mainly through divorce but sometimes through bereavement. Of those whose marriages come to an end, half will go on to marry again. The result is a growing number of stepfamilies and blended families, couples who are bravely raising a combination of children from their previous and present marriages, with all the joys and headaches that entails.

Creating an estate plan that provides fairly for all the children of the family, whilst fairly reflecting what each spouse has brought to the marriage and making sure that each spouse is comfortable in old age, can be a complicated and emotive task. In this article we look at the main areas you might want to think about when starting to put together an estate plan for your stepfamily.

Do you already have a will? It’s probably invalid

If your existing will was made during your first marriage, it’s unlikely that it will still be fit for purpose. Any gifts that you left to your first spouse in that will were automatically cancelled when your divorce came through. If you appointed your first spouse as executor of your will, that appointment was automatically cancelled too.

If you made a new will after your divorce, that will was probably automatically rendered invalid the day you remarried. Unless your new will was written “in contemplation of marriage” to your present spouse, it automatically became invalid on your wedding day. So, unless you have written a new will since your second wedding, you are presently intestate.

Do the intestacy rules work for you?

If you are intestate, your new spouse will inherit the bulk of your estate, namely the first £250,000 of your estate, and half of any excess over and above that sum. Your biological children will inherit anything left over but your stepchildren will not inherit from you. However, once your new spouse has inherited from you, on their death, it is their biological children, not yours, who will go on to inherit what was once your money.

If that isn’t how you want things to pass, it is imperative that you make a will reflecting your true wishes.

What is yours?

You may have come into your second marriage with some capital assets of your own. Perhaps you received a financial settlement as a result of your divorce. If you invest those assets into a new home for you and your new spouse, it makes sense to identify your share.

Don't own your house as “joint tenants”, which is the basis on which most couples own their houses. Instead, consider converting your ownership into a “tenancy in common”, in which your respective contributions to the purchase of the property are recognised as separate and distinct shares, rather like shares in a company. This gives you much more flexibility to provide for your family equitably and protect your own children from losing out if you pass away first.

Who do you want to provide for?

The likelihood is that you will want to make your spouse’s comfort and welfare the main priority if you pass away first. At the same time, you will probably want to make sure that your children receive an inheritance from you after you have gone.

Making simple mirror wills leaving everything to each other on first death and then to the children on the second death sound like a good idea, but is actually a mistake more often than not.  If you die first, everything will then pass to your spouse, but there is nothing to stop them then changing their will so as to leave everything to their own children, leaving your children out altogether.

Even if you trust your spouse not to do such a thing (which, in my experience, is naïve), your spouse may remarry after you are gone, rendering their mirror will invalid and themselves intestate, so that the bulk of their estate, including what was once your money, will go to their new spouse!

The better solution is to make Protective Property Trust Wills, which benefit your spouse your children and your remoter descendants and protect your assets for the family for up to 125 years after your death.

How complex is your new family?

The more complex your new family, the more thought will have to go into your estate plan to ensure that everyone’s needs are met.

This is where a Protective Property Trust will is a bonus. It gives you the opportunity to appoint friends, relatives or professionals as trustees. You can choose the people you believe have the skills to carry out your wishes fairly. You can accompany your Protective Property Trust Will with an Expression of Wishes document, giving your trustees clear instructions as to how you want them to take care of your money and how you want it to be distributed for the good of the whole family.

Think about later life

Consider what you would like to happen, not just upon your death, but in later life if you become unable to manage your affairs for yourself. We are living longer, but sadly this often means we need a lot of support with financial matters and big decisions in our later years. Planning in mid-life to have the right people in place to make those decisions for you is a smart move. You can do this by executing Lasting Powers of Attorney. You might want to a combination of your spouse, children and stepchildren to act as your attorneys for balance. Or you may prefer to stick with just your spouse or just your own kids.

Life Insurance is key

Life insurance has never been cheaper when comparing monthly premiums with benefits available on death. Talk to a financial advisor to find out what level of cover is available for the monthly premium you can afford. You can complete forms to have the proceeds of the policy paid out to a nominated person on your death, instead of passing through your estate. For example you can nominate your children or your spouse, or the trustees of your will to receive the proceeds, as you see fit. This provides you with much more flexibility and scope for providing for everyone you want to look after.

If yours is a second marriage, the important thing is to take action to retain control of your estate, and make sure that the people you care about are adequately and fairly provided for.

If you are affected by the issues discussed in this article, please feel free to call us on 0151 601 5399, or fill in the contact form below, for free impartial guidance.

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