Having a will in place is an important part of providing for loved ones after you are gone. But making or updating a will becomes even more crucial when you wish to provide for children from a previous relationship. This is because, when you don’t have a will, you run the risk that they may receive nothing from your estate, or that they won’t receive what you want them to.
What could happen if you don’t have a will?
If you pass away without a valid will in place, a set of rules called the ‘intestacy rules’ will determine what happens to the money, assets, and possessions that make up your estate.
These rules can often have effects that you would not wish, because the purpose behind them is really only to provide certainty as to how your estate is dealt with upon your death. For control over how your estate is distributed, you need to make a will.
With that in mind, here are a few situations showing how the intestacy rules may do something completely against your wishes in relation to children from a previous relationship.
Stepchildren
If the children are not related to you by blood – i.e. they are your stepchildren – then under the intestacy rules, they would be unable to inherit anything from you (unless you legally adopted them during your lifetime).
When you have a current spouse or civil partner
If you have remarried or entered into a new civil partnership, the intestacy rules will give priority to your spouse or civil partner in terms of who inherits from you.
There is something called a ‘statutory legacy’ for the spouses and civil partners of someone who has passed away without a will. This determines that a set portion of your estate’s value (currently £322,000) will go automatically to your spouse or civil partner. Anything left in the estate after that will be divided, with 50% going to your spouse or civil partner as well, and the remaining 50% being split equally between all of your children.
Here’s an example to illustrate how it can work:
Peter has four children: Precious (his daughter from a previous marriage) and three children with his current wife, Ann. Peter dies without making a will. His estate is valued at £422,000. Even though Precious was Peter’s favourite child, she would only receive £12,500 from his estate under the intestacy rules. The first £322,000 would go to Ann as his spouse. The remaining £100,000 would then be split in half, with 50% also going to Ann, and the other 50% being divided equally between all of Peter’s children (£50,000 divided by 4 means a share of £12,500 for each child).
It is important to understand as well that if the estate’s value is less than or equal to the statutory legacy amount then all of it will go to the surviving spouse under the intestacy rules.
In addition, your spouse or civil partner will inherit all of your personal possessions on top of the statutory legacy. This can be significant, especially when there are certain possessions that you would like to be passed to your children from a previous relationship.
And personal possessions include more than you may first realise. They include, for example:
- Watches, jewellery, antiques, and keepsakes
- Cars, motorbikes, and other vehicles
- Pets
- Furniture
- Phones, TVs, computers, and other tech
At the time of writing, the statutory legacy is only given to spouses and civil partners. However, there are government plans to extend this to unmarried couples as well.
What steps can you take?
1. Make a will
Making a will allows you control over what happens to your money, possessions, and assets after you’re gone. In this way, you can make clearly defined provision for children from previous relationships.
2. Look at jointly owned property
If you own property (a house or land) jointly, you and the other owner will hold it as either ‘joint tenants’ or ‘tenants in common’. If it is held as joint tenants, your share of the property will automatically pass to the other joint tenant upon your death, even if you have a will. But if you wanted to pass your share to children from a previous relationship, for example, you can ‘sever’ the joint tenancy so that you hold the property as tenants in common instead. This allows you to pass down your share of the property according to the wishes set out in your will.
3. Consider setting up a trust
Trusts can be created during your lifetime, or set up by the terms of your will. At their most basic, trusts allow you to give money or assets to trustees to hold for the benefit of one or more beneficiaries. There are many different kinds of trust arrangement, but two types that may be useful when providing for children from previous relationships are:
- Life interest trusts – these allow you to leave assets to someone to enjoy for their lifetime. They are entitled to any income which the assets generate – and if the trust includes property they will have the right to live in that property for their lifetime – but they are unable to dispose of the trust assets. As such, they couldn’t spend the underlying capital, or sell any house that was in the trust. On their death, the trust assets will go to the beneficiary or beneficiaries specified by the trust. You can use this arrangement, for example, to leave the house you own to be enjoyed by your partner for life, without allowing them complete ownership of it, and so ensure that it is ultimately passed to your children from a previous relationship.
- Discretionary trusts – these allow you to appoint trustees who are empowered to distribute the trust assets (as and when they decide) to a set group of beneficiaries. You can make a letter of wishes alongside the trust to guide the trustees’ decisions. Discretionary trusts can be flexible and practical arrangements. They allow decisions to be taken based on the beneficiaries’ circumstances at the relevant time, rather than months or perhaps years earlier at the time when you set up the trust or made your will. However, you will need to put faith in your appointed trustees to make the sorts of decisions you would approve of.
Trusts can have a variety of tax implications, and it is important to be aware of them. If you are considering a trust, be sure to seek legal advice before putting one in place.
Getting expert legal advice
You may have discussed with your current partner about leaving everything to them, on the understanding that they will provide for your children (even those from previous relationships) when they pass away. However, this is risky. Life events can easily change the situation. Your partner may change their mind, and even friendly relations between them and a child from your previous relationship could turn sour if unforeseen circumstances arise.
It is best not to leave such important matters to chance. Taking the necessary legal steps ensures you have the peace of mind knowing that your children are provided for.
At Bridge McFarland, we can help you to put in place secure and effective arrangements to provide for your loved ones. If you would like expert advice on your situation, please just get in touch with us.
