Protecting Children's Inheritance in Second Marriage
21 December 2018
In England and Wales, if you die without a valid Will in place, then the law will decide who inherits everything you own. Inheritance laws called the Rules of Intestacy place your loved ones in order of priority and you could find that any children you have from a previous marriage lose out in favour of your new spouse.
How do the Rules of Intestacy Work?
The Rules of Intestacy are strict and do not always accommodate modern family situations. Under these rules, your spouse or civil partner will be recognised as the main Beneficiary of your Estate. Then if there's anything left, your children would come next, followed by your grandchildren or great grandchildren, then your parents, siblings, grandparents, aunts and uncles, and so on.
As the main Beneficiary, your spouse would be entitled to inherit all of your personal possessions, the first £250,000 of your Estate and then half of what's left (if there is anything). The other half of what's left would then be divided equally between your children. This means that your children could be left with very little or nothing at all from your Estate.
Take Tony's situation as an example. Tony is 65 and has three grown up children (Ben, Tom and Laura) from his previous marriage. Tony got married 15 years ago to his current wife, Jude. Tony owns the home that he and Jude live in. Tony also owns some shares and has some savings in the bank. His Estate is worth £400,000 in total.
When Tony dies, Jude inherits the first £250,000 of his Estate, leaving a further £150,000. Jude then inherits half of this, leaving £75,000 to be divided between Tony's three children. Jude inherits a total of £325,000 while Ben, Tom and Laura inherit £25,000 each.
While the family all feel that Tony would have wanted to ensure that Jude was provided for in her later years, the children feel that their dad would have wanted to leave more to them than this. But this is purely speculation as Tony never set out his wishes in a Will.
What Happens When Jude Dies?
Once Jude has inherited some or all of Tony's Estate, this will then go on to form part of her Estate when she dies.
If Jude hasn't left a valid Will then her Estate would be dealt with under the Rules of Intestacy. Tony's children would not be recognised as being entitled to inherit anything from Jude under these rules. Even if Jude did make a Will, she would not have been obliged to name Tony's children in this.
What Could Tony Have Done Differently?
If Tony wanted to leave a legacy for his children while also ensuring that Jude was provided for, he could have prepared for this by making a Will setting out his wishes. He could have specified exactly what proportion of his Estate he would like to pass to Jude and to each of his children. He also could have specified any personal possessions that he would like to pass on to a specific individual.
He could even have included a Life Interest Trust in his Will to deal with his assets including his property. Tony could have allowed Jude to continue living in his property for the rest of her life (or until she remarried – whichever Tony decided). After this point, the property could then have been passed on to Tony's three children.
By using a Trust in his Will, Tony could have made sure that Jude was provided for during her lifetime but also ensuring that, after her death, his children inherited his Estate.