How to Ensure Your Children are Protected: Estate Planning for the Blended Family
Written By: Edward Danks
Category: Private Client
18 September 2023
The statistics for divorce across the UK suggest that between 40% to 50% of marriages and civil partnerships will end in divorce. When a couple divorce, in many instances, they will have children. If those who divorce re-marry or enter into a new civil partnership and each of the spouses or partners have children from earlier relationships, deciding who gets what when a spouse or partner dies is fraught with difficulty.
Estate planning for blended families is challenging, especially when relationships amongst the adults and children are strained or non-existent.
It is especially important to remember, irrespective of whether you have made a Will, natural and adopted children have Legal Rights.
Entitlement of natural and adopted children
Natural and adopted children have Legal Rights to inherit part of the estate of their parent whether there is a Will or not. Legal Rights are automatic and those dealing with the estate must address these when a parent dies.
If there is no Will, the surviving spouse or civil partner is entitled to Prior Rights – the family home (up to the value of £473,000) the contents of the family home (up to the value of £29,000) and cash (up to £83,000 if there are no children, £50,000 if there are children). If the Prior Rights exhaust the entire estate, there will be nothing available for Legal Rights.
If there is estate available after Legal Rights or if the deceased parent made a Will, the surviving spouse or civil partner is entitled to one third of the moveable estate and the natural and adopted children are entitled to one third of the moveable estate. This can be difficult when relationships between the natural children and a stepparent are difficult. Stepchildren are not entitled to inherit anything from a stepparent’s estate.
It is also important to remember that if you transfer your estate to your new spouse or partner on your death, when they die, your children will have no automatic entitlement to share in their estate.
Is creating a trust the answer?
If you put property, assets, and investments into trust, you no longer own them. The trust becomes the owner. The beneficiaries are those who are entitled to the proceeds of the trust. There are also several distinct types of trust.
When you transfer property into trust, there may be Inheritance Tax implications for you. You also need to consider the impact on your spouse or civil partner if you die and your children exercise their entitlement to the trust property, especially if it includes the family home.
This area of law is complex and specialist advice should always be taken.
How can I ensure my children are protected?
The very first thing is to review your Will or make one if you do not already have one. Carefully consider the structure of your Will with your solicitor and consider all your options, including trusts. After that, review your Will regularly, especially whenever you have a significant life-changing event.