When we consider what will happen to our estate after we die, we usually think first about leaving some or all of it to our immediate family. This can often include our spouse, civil partner, ‘common law’ partner, children or grandchildren, for example. However, this is not always as straightforward as it sounds. There can be complications when someone dies without writing a Will, remarries and has a second family, or if there are large bequeaths or inheritances that could be subject to dispute or controversy if not distributed correctly.
Here are some things that you can do now to ensure that your estate is shared out and dealt with according to your wishes after you die.
Write a Will
If you die without writing a Will, this is called intestacy and there are strict laws connected to this that govern how someone’s estate is distributed, to whom and in which order. So-called ‘common law’ partners, are not automatically entitled to inherit their partner’s estate if they are not married or in a civil partnership and not mentioned specifically by name in a Will. The same goes for any stepchildren.
If you would like to ensure that your estate goes to the people you intend it to, the only formal way to do this is to write a Will giving full instructions. This includes naming an executor whom you trust to follow your wishes and carry them out responsibly, morally and legally. You can update and alter your Will as many times as you wish. The key thing is to always let someone know when you have changed it, and where they will be able to find the most recent copy.
Gifting assets during your lifetime
This is a common method to ensure that, not only do your assets go to the beneficiaries you want them to, you can also get the pleasure of seeing them pass to their new owners while you are still alive. This can be a good way to reduce or even avoid inheritance tax, but it must be done carefully and under professional advice.
You must ensure that you leave yourself enough money and assets to look after yourself right to the end of your life. Giving away too much money or property so that you cannot pay for residential care when you need it, for example, can be seen legally as deprivation of assets and is not looked upon favourably by the Government. You may also find it hard to relinquish control of your property if, say, the recipients get divorced, the assets become part of the settlement arrangements and then pass out of your immediate bloodline’s ownership. It is therefore vital to seek professional advice before going too far down this route.
Financial trusts
If you are concerned about recipients splitting up or not using your assets as you intended them to, there is the option of setting up a financial trust. Financial and probate trusts can hold all or some of an estate until the beneficiary reaches a certain age. They are protected and overseen by responsible trustees chosen from among family members, friends or even professionals such as solicitor’s firm. Trustees can also pay out a regular income to distribute the money evenly and make the most of the investment portfolio chosen for the trust. They are responsible for making the best decisions in the interests of the beneficiaries as possible.
Life interest trusts can also help keep assets in a certain bloodline in the event of someone remarrying. An example of this could be someone allowing a second spouse or civil partner to stay in a property until they die, or wish to leave it. After this, however, the property’s ownership reverts to another intended beneficiary, such as a child or children from a first or prior marriage or partnership. Such trusts can still be liable for inheritance tax or even capital gains tax, but they do protect assets for children and grandchildren and help clarify the situation for blended families.
Whatever method you choose to protect your assets for your intended recipients, the most important consideration is seeking appropriate professional advice. In some cases, simply writing a Will giving details of what you want to leave to whom will be sufficient to safeguard your intentions. More complex scenarios, however, may require a more detailed approach involving trusts, lifetime gifting and a closer look at the laws of inheritance tax.