Estate planning for the next generation: Blended families and second marriages
Modern families are changing beyond the traditional structure, with needs becoming ever more complex as structures change and families grow. One example of this is when people remarry, sometimes becoming what is known as a “blended family”. These issues can add complexity to estate planning and ensuring control over the passing of wealth.
We believe everyone should consider and have the minimum planning of putting a Will in place, to take control of who will inherit your estate when you die & Powers of Attorney in place, for who will be in charge of making decisions should either of you lack capacity.
For those on their second or subsequent marriages, there is a bit more to think about. What if you die and leave all your assets to your spouse? Would you expect them to live the rest of their life on their own? There is a high risk that if your surviving spouse were to remarry, their Will could leave the assets they inherited from you to their new partner or their own children – not to yours.
Because the law does not recognise love, trust or promises, action has to be taken. Asset protection against this can be built into a Will, giving a spouse access to your assets but with you keeping control of their ultimate destination.
The effect of second marriages on legal rights and succession
Consideration might also be needed to legal rights. These are the rights of your children and your spouse to make a claim on your estate, regardless of the terms of your Will. Legal rights can overrule a Will as they are an entitlement and have to be paid out of your Will if claimed.
Legal rights can and often are given up by children when their surviving parent is inheriting the whole estate as they know they will eventually inherit it all when their second parent dies. This may create issues, where with a second marriage you leave assets to your child’s step-parent before your child which often results in the breakdown of these relationships as children realise they could be disinherited from what they feel is rightfully theirs.
Second marriages: Protecting your pension
Pensions are usually not covered by your will and require separate thought and documents. If your pension goes to your spouse it might be they can then leave the pension to their children but not to yours. You may wish to leave your pension via a trust arrangement which can again benefit & provide for your spouse but you control the ultimate destination to your own children when your spouse later dies.
Inheritance Tax
If you have been previously widowed then you may have inherited that spouse’s Nil Rate Band (NRB) and main Residence Nil Rate Band (RNRB) for inheritance tax (IHT). That extra allowance is lost unless you put bespoke wording in your will to capture it. For those on their second or subsequent marriages, there is a bit more to think about and much planning you can do to make sure you have control over what goes to whom and how little inheritance tax is paid.