Second marriage and inheritance issues: what to consider
How to protect your children’s inheritance when you re-marry
A third of all marriages in England and Wales are between couples where one or both spouses had been previously married. Whether the previous marriage ended in death or divorce, many of these couples will have children from previous relationships.
When it comes to estate planning, how can you provide for your new spouse and any children from this marriage, while also ensuring your other children also inherit?
Blended family financial situations are rarely straightforward as there are many variables to take into account, including:
- Your family’s overall assets
- The age of any children involved
- The age and health of your second wife or husband
- The age and health of your previous partner
- Your pension
- Who else your children may inherit from
This is why speaking to one of our specialist Wills and Trusts solicitors can make all the difference to your estate plans.
In this article, we look at the legal considerations recommended if you are contemplating a second marriage.
What legal rights does a second spouse have when I die?
According to current inheritance rules, your new spouse would be entitled to inherit most, or potentially everything, you own, leaving very little (perhaps nothing) for any children you have from a previous relationship to inherit.
What happens to your Will if you re-marry?
Many people do not realise that remarriage cancels any existing Will that is in place, and the more complicated family set-up means that consideration of new Wills, and possibly a pre-nuptial agreement, is essential.
Ultimately, unless a new Will is drawn up to reflect your wishes for the new marriage, the following intestacy laws will apply to your estate on your death.
- If you were married with children (from either or both marriages), then your surviving spouse will receive the first £270,000 of the estate and all personal chattels. The remainder will be divided equally between your spouse and your children in equal shares to be held in trust until they are 18.
- If you were married but did not have any surviving children, grandchildren or great-grandchildren, your entire estate would pass to your surviving spouse.
This can have implications for your blended family. For example, your home may end up jointly owned by your second spouse and your children from your first marriage.
How do I balance providing for my children and for my new spouse?
Given that the intestacy rules are essentially “one size fits all”, if you want to make a bespoke provision that reflects your family circumstances and finances, it is essential that you make a new Will after the marriage, or beforehand in contemplation of the forthcoming marriage. It is far preferable to deal with the situation at this stage than for a family row to erupt between step-parent and step-children following an unexpected death.
Many people in this position find that the best way to proceed is to create a trust in their Will, perhaps allowing the second spouse use of the deceased’s spouse’s assets during his or her lifetime, but with the certainty that after the second spouse’s death the deceased spouse’s children will receive their parent’s assets.
Example: Peter sets up a trust
Peter’s Will could create a trust containing all of his assets that are not jointly owned with Lucy. The trust would provide that Lucy could benefit from the assets during her lifetime, but when she died the assets would pass to Peter’s children from his first marriage.
What happens to my assets if I die and I haven’t made a Will?
If you die without making a Will leaving a spouse and children then the intestacy rules mean that any assets in your sole name (up to the value of £270,000) will pass to your spouse, as well any assets which you and your spouse own in joint names as joint tenants (see below).
Your spouse will also receive half the remainder of your assets (i.e. anything over £270,000). The other half of the residue passes outright to your children on your death.
Example: Peter dies intestate
Peter is married to Lucy and this is his second marriage. Peter has two children from his previous marriage and Lucy has one child from her previous relationship. Peter’s assets (held in his sole name) total £350,000. Peter and Lucy own their house, valued at £300,000, jointly as joint tenants. Peter dies without making a Will.
Assets in Peter’s sole name up to the value of £270,000 will pass to his current spouse, Lucy, as will any assets which the two of them own in joint names as joint tenants. So Lucy becomes the sole owner of the house.
Lucy will also receive half the remainder of Peter’s assets (£40,000). The other half of the residue (£40,000) passes outright on Peter’s death to his children.
Allowing your assets to pass under the intestacy provisions may be undesirable for several reasons. First, you run the risk that all of the assets passing outright to your spouse ultimately pass to other beneficiaries (perhaps your spouse’s own children) and your own children are effectively disinherited. Alternatively, the intestacy rules may make insufficient provision for your spouse, especially if the new matrimonial home is in your sole name.
What about jointly owned assets?
If you own the matrimonial home jointly with your spouse, it may be more appropriate for this to be owned as tenants in common rather than as joint tenants. Owning the home as tenants in common means that each of you can deal with your respective share of the family home in your Will, leaving it to a trust if appropriate. By comparison, if you own the house as joint tenants it will pass automatically to the surviving spouse, and again any children from a previous relationship could lose out.
Example: joint assets vs tenant in common
Peter and Lucy jointly own their home, which is worth £300,000 after the mortgage has been repaid. They own as joint tenants, so on Peter’s death the house passes to Lucy outright. Lucy then leaves the property in her Will to her child, meaning that Peter’s children inherit nothing.
Alternatively, Peter and Lucy could hold the house as tenants in common. In his Will, Peter leaves his share of the house to a trust. As a result, Lucy retains use of the house during her lifetime, but on her death Peter’s children become entitled to Peter’s share in the house.
Maintenance obligations for children
If you are paying child maintenance to children from a previous relationship then it is important to remember that those children may have a sustainable claim against your estate if you die while still paying maintenance and without making financial provision for them. If it is not possible to deal with this from assets in your estate (perhaps because they are all required by your spouse) then thought could be given to taking out suitable insurance cover to deal with this.
What happens if the second marriage ends in divorce?
This is not uncommon and thought should be given to protecting the interests of children from a previous relationship if this were to occur. Recent case law has strengthened the enforceability of pre-nuptial agreements and the Law Commission has recommended that pre-nuptial agreements should become legally binding, provided certain safeguards are incorporated. One of those safeguards is that the (financial) needs of both spouses must be provided for in a pre-nuptial agreement. For couples with assets over and above this level, with independent incomes, who wish to ensure certainty that property acquired before the marriage is preserved for their own children in the event of a relationship breakdown, a pre-nuptial agreement could be a very useful tool.
Specialist estate planning for second marriages and blended families
For specialist legal advice on Wills and trusts to meet the unique challenges of a second marriage, call us now on 0800 652 8025 or contact us online. Your initial consultation is free. Our specialist solicitors are based in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton are ready to discuss your case.