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The potential pitfalls of making a Will after remarrying and how to avoid them
When a married couple makes mirror Wills, they usually follow a simple formula – everything is left to each other when the first spouse dies, then passes to the children on the second death. This is an efficient and proven structure when all children are from the same relationship.
But is this the case when couples have children from previous marriages?
The standard mirror Will structure is problematic for a number of reasons when each spouse intends to benefit different people, as they may if they have children from previous marriages.
The largest issue is that all assets pass to the surviving spouse outright on the first death. This means that the spouse who dies first will not be able to guarantee their children will inherit, as the survivor will be fully entitled to leave all assets to their children only.
Even if both Wills included legacies for both sets of children, the surviving spouse can change their Will to exclude their spouse’s children after their death or even to leave the estate to another partner if they remarry – meaning the spouse who died first could effectively be leaving everything to people they have never met.
This can create uncertainty and make inheritance a lottery, as who will inherit depends entirely on which spouse passes away first.
In other words, the salient issue is the lack of asset preservation and protection for the spouse who passes away first. So how is this issue avoided?
A common solution to this issue is to incorporate a trust structure in both Wills known as a life interest trust. The Wills work as follows: rather than passing outright to the surviving spouse, all assets are left in a life interest trust for their benefit. This means the surviving spouse does not own the assets – the trust does. The assets will pass outright to the children on the second death.
The surviving spouse is left a ‘life interest’ in the estate, allowing them to continue to live in the matrimonial home and take any income generated by the assets passing under the Will whilst they are alive – but the capital value is preserved for the testators’ children. This means that each spouse’s assets are guaranteed to benefit their respective children without cutting each other out of the Will entirely.
A life interest trust is also rather flexible. Powers can be granted to trustees that allow them to appoint trust capital to the children if it is necessary to do so. This means assets can be given straight to children if they need it (such as in the event of a divorce). Without a life interest trust, the assets would be owned by the surviving spouse, who would not be obligated to provide any financial support to the children.
A life interest trust Will can also result in reduced care fees for the surviving spouse. As the assets from the first spouse’s death belong to the trust rather than the survivor, they cannot usually be considered in financial care assessments. There is no guarantee this mechanism will work in the future as legislation may change, but life interest trusts are currently effective for this purpose.
In summation, if you and your spouse intend to benefit each other with your Wills but are concerned that you wish to benefit separate people after you have both passed away, a life interest trust is an excellent way to guarantee your assets are protected and preserved whilst ensuring the survivor is provided for when they are alive.
The information contained in this article is not to be construed as a substitute for legal advice. We recommend that you consult an experienced solicitor before proceeding.