Will-Writing and Lasting Powers of Attorney
Not all wills are created equal, and most are never created at all...

All of us know we should have a will, yet too many of us do not. If we die without a will a dependent child may become a ward of court and our estates will be distributed according to the laws of intestacy.  Although this might be suitable for some of us, for many this may be quite different to what we would wish.  For full details of what happens if you die intestate (without a will) click here.

Wills can solve these problems, but they can do much more besides if they are written correctly.  Wills may include instruments to protect our estates once we are gone in case our beneficiaries encounter threats such as bankruptcy, divorce, remarriage and inheritance tax. Unfortunately a will written without due attention could be challenged, or can fail to meet your wishes.

If you do have a will but are uncertain whether it contains such measures and believe they could be relevant to you, we strongly recommend reviewing your wills. We believe a professional financial adviser qualified to advise on inheritance tax, long term care and estate planning is an ideal choice to do this.
Alfred Nobel's Last Will & Testament

The potential danger of simple mirror wills - the "Cinderella" problem

Couples often wish to write wills which ensure that if one of them dies everything passes to the surviving spouse, then when the surviving spouse dies everything passes to the children.  To do this will-writers and solicitors often write simple "mirror wills".  This means that each spouse has a will which is essentially identical to the other, with each will stating that if they die first then their estate passes to the surviving spouse, and if they die second their estate (which now includes the estate of the first spouse) passes to the children.  This seems fine at first glance.

But there's a potential danger here - 
the will of the first person to die has no power on the second death.  This means there's no guarantee the estate will reach the children at all.  To understand this danger, look at the example below.
Imagine a couple, Peter and Anne, take out mirror wills with the hope of ensuring that the first to die will receive the whole estate which then passes to the children after the second death.

As we can see, because the surviving spouse remarries and writes new simple mirror wills with his new wife (a decision which may be completely benign) everything which used to belong to Peter and Anne has been inherited by Jane, a third party. This is despite the fact that both Anne and Peter told their will-writer they wanted everything to go to the children on the second death.  

If she were of a mind to, Jane could now re-write her will and could legitimately dis-inherit the children if she so wished.

As Anne may never even have met "Jane" it's understandable that she might have reservations about this and may wish to take steps to avoid this happening if possible.
This certainly doesn't mean that simple mirror wills are always unsuitable - for some couples they will be appropriate, but there are options which can help avoid this scenario which should be considered before making that decision. For example your will could create a trust to protect the right of the children to ultimately inherit, whilst allowing your spouse the rights to your estate whilst he/she is alive.  If you'd like to discuss these options feel free to contact us.

The role of Trusts in your will

A trust is a legal instrument whereby an asset is owned by one party (the trustee) for the benefit of another (the beneficiary) and can be created in your will.  This simple arrangement can do several things.  

 Trusts to prevent Children having access until they come of age

When leaving a bequest to a child or young adult you might want your will to create a trust to hold the bequest such that they cannot have access until they reach a given age.  You could allow the trustees the discretion to use the trust funds to pay for education or any emergencies which may arise before the specified time.

 Trusts to protect your home for you and your partner.

Joint home owners may use a combination of a trust in their will and a legal change to the way in which they own their home together to ensure that each spouse's half of the family home is protected against any future care costs, bankruptcy or a remarriage of the other spouse.  Due to the change in the way the home is owned, this strategy may be effective even whilst you are both alive.  There are downsides to this strategy however, so we strongly recommend that you discuss this with a qualified adviser.

 Trusts to protect your estate for your beneficiaries

Leaving funds or assets in trust for your beneficiaries can be very useful even if you want them to have access at any time.  A trust could be written to give your beneficiaries access to the bequest whenever they want, but allow them to leave the assets in the trust until needed. Whilst they are in the trust the funds may be protected if your intended beneficiaries divorce, go bankrupt, suffer long-term care costs or inheritance tax on their own estates when they die. This is particularly useful where you suspect your estate might ultimately "leap-frog" your children and fall to your grandchildren - if so, the trust ensures no inheritance tax is paid on your children's estates when they pass away and your grandchildren inherit the benefit of the trust, or your great-grandchildren after them!

It's important to note that a trust created by your will cannot protect your estate from inheritance tax whenyou pass away, though a trust created whilst you are alive might do so, or you might be able to achieve this goal in another way.  Click here for more information on inheritance tax planning advice for your own estate - it's well worth considering both of these areas together.

Next Steps

If you would like to discuss the options, do feel free to contact us.

Telephone:   02920 009 479 
email:   enquiries@whitchurchifa.co.uk

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