The life events that influence legacy making

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Record property values and increasingly complex family structures make inheritance planning a growing issue. However, the percentage of UK adults without a Will remains stubbornly high. And of those who have laid down their wishes in black and white, many have not updated their Will despite having experienced a significant life event.

Whether you are moving in together, marrying, entering a civil partnership, having children, divorcing, re-marrying or a new civil partnership, each of these momentous life events has implications if you were to die without leaving a Will. Estate planning is not only for the rich and famous.

Urban myths, such as assets automatically being passed to a partner, or family members being able to dictate how an estate is distributed, often lead people to rest on their laurels. However, without a Will, intestacy rules come into play which govern how a person’s estate is distributed.

These rules don’t include any provision for cohabiting partners, and they also allow children under 18 to receive assets without any control over how the money is spent. It’s unlikely that you would want either outcome in such circumstances, emphasising the importance of treating a Will as a living document to be reviewed at regular intervals. It should reflect your wishes at the time you write it but, as life moves on and your circumstances change, so should your Will.

Writing a will is also a good opportunity for couples to consider inheritance tax implications, particularly if you are cohabiting, as you will not benefit from the exemptions and transfers available to spouses and civil partners.

So, when should you think about writing or updating your Will?

Buying a property

If you buy a property alone, and have no children or partner to consider, intestacy may not appear to be such a big issue at first glance. Under the rules, your estate would likely be distributed to parents or close relatives if you were to die. However, in most circumstances, you will want to be proactive in order to protect the interests of those close to you. This is particularly important for cohabiting couples who buy a property together, agree that one has become entitled to a share in the other’s solely owned property, or where children are involved from previous relationships.

Ownership of property should be structured to reflect this and the intentions of each upon death.  Property can be owned as ‘Joint Tenants’, where there are no defined shares in the property, irrespective of contribution. Here, the whole property would pass automatically to the other co-owner when the first dies, regardless of the intestacy rules or any Will. Alternatively, it can be owned as ‘Tenants in Common’, where each will own a specific share (often 50%/50%), leaving them free to choose what happens to their share of the property on death. This enables a share to be left to respective children or others directly. It can also be structured within your Will to allow the survivor to continue living in the house until they die or for a set period.

Protecting assets for children from an earlier relationship

A common challenge concerns ring-fencing assets and how to provide for children from previous relationships.

Together with appropriately structured property ownership, the use of trusts can offer effective solutions to practical day-to-day problems. For example, a trust can be set up for the surviving partner to benefit from the estate with the arrangement that it would then pass to their respective children following the survivor’s death.

Moving in together

Unlike married couples and those in a civil partnership, cohabiting couples don’t receive the same protection under intestacy rules. Typically, the whole of the estate would go to the children or, if they have none, to parents or other family members. Consequently, a surviving cohabitee may be turned out of the couple’s home if it was not held as Joint Tenants. While the survivor may have grounds to apply for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975, this is a time-consuming and expensive process.

It cannot be emphasised enough, therefore, that the only way to avoid uncertainty is by making a Will to prevent the division of assets being decided by the intestacy rules.

Getting married

Many people do not realise that any existing Will is automatically cancelled when you get married or enter into a civil partnership. It is vital, therefore, to put in place new Wills as a couple, or stipulate that your Will ought not to be cancelled by the marriage or civil partnership. To determine what will happen to assets that you bring to the marriage on separation, you may want to consider a pre-nuptial agreement.

Having children

In your Will, you can appoint guardians to be legally responsible for any children you have under the age of 18, if you and your partner or spouse both die before they become adults. This also allows you to set out your wishes regarding schooling or maintaining contact with grandparents, or, for example, the age at which you would wish your children to inherit. Legally this cannot be before 18, but you may wish to delay this until they reach a more mature age. If any child has any special circumstances that may affect their capacity to manage their inheritance or personal wellbeing, such as a disability or some form of drug or alcohol addiction, again you can make provision for this.

You can also choose a substitute or establish what should happen if any named guardian were to separate or divorce.

Getting divorced

If you have an existing Will that leaves everything to your spouse, it will remain valid until the decree absolute is confirmed, even if you have separated or received your decree nisi. This means that the spouse you are divorcing would benefit if those are the terms of your Will.

Equally, if you do not have a Will and you were to die before the divorce is completed, then the intestacy rules would apply. Again, the spouse you are divorcing would benefit, rather than any new partner, parents or siblings.