Moving House? Here’s How to Keep Your New Asset Protected
Estate Planning Tips for New Homeowners
Whether you’re taking your first tentative steps on the housing ladder, downsizing or upsizing, moving house is one of those life events that lead you to take stock of where you’re at and think about the future.
Here’s a challenging question:
What would happen to your new home – and your family’s assets generally – if something happened to you, or someone close to you?
It's important to consider this, because there are so many things that can go wrong, that can cause your assets to end up in the wrong hands, or your wishes not to be respected.
Happily, with a little bit of planning, and the right advice and guidance, you can protect your home and savings and make sure the people you love are provided for, no matter what.
Here are some of the main areas it pays to think about while you’re settling into your new home:
1. Don’t leave your home’s future to chance
Dying without a will means dying “intestate”. This in turn means that your assets are divided up according to an arcane and complex set of “intestacy rules”.
The rules include a number of odd quirks that you might not expect. For example, if you are married with children, your spouse doesn't necessarily inherit all you have, but instead inherits a complicated package consisting of a “statutory legacy”, all your “chattels” and a proportion of anything left over, with your children receiving the rest.
If you live together but haven't married, your partner inherits nothing at all from you on your death. In fact the rules make no provision at all for people who depend on you financially but aren’t either married to you or closely related to you by blood. This can leave your partner’s future home in jeopardy if you pass away.
So, making a will is the most basic step you can take in making sure that your new home will be inherited safely by the people of your choice.
2. Leaving everything absolutely to your other half can be a mistake.
Many couples assume that, having made straightforward wills, leaving everything to each other and then to their children, everything will pass smoothly to the children when they have both gone. Not so, unfortunately.
Problems arise when widowed spouses move on with their lives and remarry. Getting married automatically invalidates a will. So, if you die first and your spouse later remarries, he or she becomes intestate on their wedding day. Which in turn means that most, and sometimes all, of the assets your spouse inherited from you, including your share of your new home, are automatically diverted from your children to their new step-parent.
3. Do you want the council to inherit your share of the house?
What if, having inherited everything from you, your widowed spouse later has to go into residential care?
Currently, the average length of a stay in nursing care is four years, and the average annual cost £40,000. That’s £160,000.00 wiped off your children’s inheritance. What proportion of their inheritance – and of your new home - would that represent?
4. Would you want your child’s ex to inherit part of your home?
If your child ultimately inherits your house, that inheritance will go on to form part of their own assets. But if they later get divorced, their inheritance will be taken into account in any financial settlement. This means that at least a third of anything you leave to your child is vulnerable to ending up in the hands of their ex. So in effect, somebody else’s child can end up inheriting a substantial chunk of your home against your wishes.
5. Accidentally leaving it to your child’s creditors.
If your child is self-employed, of course you’ll be immensely proud of them but you’ll worry too, because the risk of debt and business failure is a reality that enterprising young people have grown used to in this economic climate. Sadly, if, after having inherited from you, that risk were to become a reality, your child’s inheritance would be taken by their creditors in the event of their bankruptcy.
Happily, all of these risks can be taken care of if you have a will that is intelligently designed and makes proper use of the law of Equity and Trusts. It’s sensible to invest in making the right kind of will. Doing nothing, or not doing it properly, can cost your family your house!
If you have any concerns about the issues we have explored in this article, don't hesitate to get in touch – call us on 0151 601 5399 or fill in the contact form below.
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