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Getting a second, third or even fourth opportunity for love can make a fantastic difference to later life.
But if either person has children from a previous relationship, making sure that everyone is looked after in the event of someone’s death can become complicated and, if not handled carefully, can cause a lot of heartache and stress.
It’s a quandary that’s more applicable than ever. An estimated one in three families in the UK are blended or stepfamilies, so some forward planning and a meticulously-crafted will can keep everyone happy and ensure that an estate is distributed just as a person wishes when they die.
No matter the makeup of a family and the history they’ve got together, there’s the potential for disaster without the right planning and paperwork in place.
One common way for things to get sticky is when there’s no will, as intestacy rules will determine how wealth is shared on death. If there are stepchildren in the mix, this can make things even more complicated.
Melinda Giles, Partner and Head of Private Client at Giles Wilson and a member of the Law Society’s Wills and Equity committee, says the results of a will distributed through intestacy are rarely the same as a person’s wishes, especially as stepchildren and unmarried partners are not recognised by the rules.
“I’ve seen cases where a couple were cohabiting and one died without a will. The surviving partner had no rights to anything,” she explains.
“If you’re married, your surviving spouse will receive a share under the intestacy rules, but, if they then die without a will, their estate would only go to their kids.” The first person in this situation could find their own children are then left with nothing.
Even where there’s a will in place, there’s still a risk that inheritances won’t go as intended. “If you leave everything to your partner, there’s no guarantee they’ll leave anything to your kids when they die,” says Tracy Crookes, Chartered Financial Planner at Quilter Cheviot.
“Similarly, if you leave it all to your kids, your partner could end up homeless and penniless.
"You might think everything's amicable, but death and money can make people behave very differently.”
This means it’s best to never rely on informal inheritance plans and expect others to carry out wishes or ‘do the right thing’ once someone has gone.
It's impossible, after all, to know what the future may hold - a new partner, a spat between a spouse and their partner’s children or an unfortunate addiction could see pre-planned wishes go out of the window.
There are several options if someone wants to ensure their wealth is passed on in line with their wishes. Niki Patel, Tax and Trust Specialist at St James’s Place, says one thing to consider is for the will maker to give money to loved ones while they’re still alive.
“You could pass on your wealth in your lifetime or set up trusts where a child is too young to manage the money appropriately,” she explains.
Care will need to be taken if Inheritance Tax is a concern, however.
“Unless you take advantage of some of the Inheritance Tax allowances, you will need to live for seven years for a gift to be outside your estate for Inheritance Tax purposes.”
While this might seem like an easy fix, lifetime gifts aren’t always practical, especially where some of a person’s estate is tied up in the home they share with their partner.
Where this is the case, Patel says one option is for a person to set up a trust in their will, that gives their partner the right to continue living in the house until they die, at which point it can be passed on to the original will-maker (testator)’s children.
However, trusts need to be set properly and can be complicated, so anyone looking to use one should use a legal professional to do so. More complex trusts can cost many thousands of pounds to create, but by using a professional it will ensure they’re worded correctly with no ambiguity and allow things like potential Inheritance Tax implications to be discussed.
“A life interest trust will give your partner security of tenure so they can continue living in your home,” Patel adds.
“In addition, it ensures your share of the property is passed on according to your wishes, for instance to your kids, when your partner dies.”
As an example, Mr A and Mrs B married in their 60s. He has two children from his first marriage and she has three. They get their wills written to include a life interest trust for their home on first death.
On second death, Mr A’s half of the property goes to his two kids and Mrs B’s half goes to her three kids.
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A life interest trust can fit any family’s unique circumstances, says Sarah Hollowell, Tax and Trustee Services Director at Killik & Co, providing it’s worded correctly.
“You can decide how you want to share the property on second death, perhaps an equal share for each child rather than half to your kids and half to your partner’s or you could stipulate that the money goes to the kids if your spouse remarries rather than on death,” she says.
“You could even set it up so it could make an advance, perhaps if one of the kids needs a deposit for their first home.”
Such a trust can also be set up to enable the surviving spouse or partner to move house if they want to, perhaps to downsize or move closer to family.
Life interest trusts can be used for other assets too. For instance, if one person only has a small pension but their partner would like them to be able to maintain their lifestyle if they die first, they could place another asset, such as their investment portfolio, in a life interest trust.
This would allow the surviving partner to take the income it generates during their lifetime (and supplement their pension), while ensuring the portfolio itself passes to the deceased partner’s children when they die.
Having seen plenty of family fallouts over wills, experts recommend that any planning should start with an open and honest conversation.
“It’s not always straightforward or easy,” says Crookes, “but getting the family together to talk through all the different options and what you want to achieve can prevent any misunderstanding when you might not be around to explain what you wanted to do.”
“The terms of a trust can be designed to suit different requirements,” she adds. “Talking to a solicitor about what you want to achieve ensures your will and any life interest trust is worded correctly and in line with your wishes.”
If using a life interest trust for property, it will need to be held between the partners as ‘tenants in common’, where each has a share. If it’s held as ‘joint tenants’, which most are between couples, it will need to be altered to pass under the will and into the trust, which may incur an additional cost.
Where one has a life interest trust, having the right trustees in place is important, especially as they would be responsible for how it’s run.
Professional trustees are an option, and a solicitor or estate planning firm will have their own or be able to recommend someone.
Giles says it can also be good to have a child from each side of the family plus the surviving partner as trustees.
“This ensures that everyone’s interests are protected,” she says. “This might include making sure the property is insured and well-maintained.”
Writing a letter of wishes to sit alongside a will can help, particularly where someone’s circumstances are complicated.
This is guidance for the will's executors and, although it isn’t legally binding, Hollowell says it can be a really useful document.
“A letter of wishes gives you an opportunity to explain what you want to achieve with your will,” she says. “This could be outlining which family members you want to protect but also why you might have left someone out.”
Finally, as wishes and circumstances can change, regularly reviewing a will is a must. Giles points to some of her clients who brought their two families together when they were in their late thirties.
“Their first thoughts were for their kids but now, more than 20 years down the line, the kids are independent and their priority is ensuring their partner will be secure if they weren’t around,” she says.
Reviewing a will at least every five years or when circumstances change will ensure it keeps pace with the wishes or lifestyle of anyone planning to leave their estate to the people they want to look after.
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