If you die without a will, a fixed set of rules, the intestacy rules, controls how your estate will be inherited and who has the right to deal with your estate at your death. Under the intestacy rules:
For a lot of people, relying on the intestacy rules isn’t going to provide for their family in the way they would wish.
What happens to your assets when you die depends firstly upon how you own them. If you own assets jointly with another person, e.g. a joint bank account, then the right of survivorship usually applies, meaning that the control of the account and the money within it will pass to them as the surviving owner. If you own your home with another person, you will own it as either joint tenants or tenants in common. If you’re joint tenants, you own the whole property together, rather than having separate shares. This means that when one of you dies, the survivor becomes sole owner by the right of survivorship. If you own as tenants in common, you each own a share of the property. When you die your share passes in accordance with the instructions in your will, or the intestacy rules. Assets in your sole name pass in accordance with your will or the intestacy rules.
The effect on your will is that your former spouse is treated as having died before you (on the date of the decree absolute). Your will is not automatically revoked. If you have appointed them as your executor, their appointment is voided. Any gift to them will fail and your substitute instructions will take effect. It is usually preferable to make a new will following a divorce for clarity, even if you are happy with your substitute instructions.
Having a blended family means that you may have responsibilities in multiple directions such as to current and former partners, children, step-children or wider family, friends and relations.
Leaving your estate to a surviving spouse or partner means that on their death your assets will pass in accordance with their will. If your surviving partner remarries, makes a new will in different terms, or meets an unexpected financial situation such as large care fee costs, there's a risk that your estate may not ultimately pass as you had anticipated. Or you may be in a partnership in which you manage your financial affairs separately, or would want to be able to direct your assets to your own side of the family ultimately. A trust could be the means by which you chose to do this.
Including a trust in your will allows you to set additional controls over how your assets may be used, rather than just giving them to people outright to do with them as they wish. A trust is its own separate ‘pot’ or legal entity into which you can put assets. You choose who you want to be in charge of the trust (your trustees) and set the rules for how it will operate. This is helpful in a situation where the people who you want to benefit are too young to look after things for themselves, or unable to manage things for themselves. Or it might be that you want to control several stages of how an asset will be used or inherited, for example you might want your spouse or partner to have the right to live in your property after your death for the rest of their lifetime, but for it to ultimately pass to your children at their death.
Children under 18 are unable to inherit outright and look after assets for themselves. If someone is under 18 when they are due to inherit, the law ensures that their inheritance will be looked after for them until they turn 18 and are deemed old enough to manage it for themselves.
However, creating a trust in your will specifically for minors allows you to set out when funds could be used by the trustees for your children e.g. for their education, maintenance or other benefit and how much of the trust could be used. The trustees could be the people who would be your children's guardians, since they would be looking after them day-to-day, or you might prefer to have different or additional people to manage the trust, to create some separation or oversight. You could also choose to specify an age greater than 18 at which you would like your children to inherit outright (commonly 21 or 25 are chosen).
The two main types of trust you can consider are fixed interest or discretionary trust.
Fixed interest trusts give beneficiaries specific rights e.g. a right for a spouse or partner to live in a property for their lifetime or to receive income from investments for their lifetime, and then for the assets to pass to children at their death.
A discretionary trust is more flexible. You choose a whole group of beneficiaries who may benefit from the assets in the trust, but it is up to the trustees to decide who gets what and when. You leave confidential guidance to your trustees in a letter of wishes to set out how you anticipate the trust fund would be used e.g. to prioritise a particular beneficiary's needs. It is important to understand that a discretionary trust gives your trustees significant power. How the trust is managed is within their control - their discretion - so they do not have to follow your guidance. For some, this kind of trust offers maximum flexibility for their trustees to deal with whatever circumstances their beneficiaries may find themselves in so they can be assured that whatever happens, their trustees will be able to act for the best. For others, that flexibility is too uncertain.
If you are considering including a trust in your will, it is important to get legal and tax advice. The different permutations of trust will have different effects on your inheritance tax allowances, the ongoing tax treatment of the trust itself and the day-to-day responsibilities of your trustees. You need to understand and be satisfied with this at the outset.
If your children are under 18 at your death, a guardianship clause allows you to appoint a person or people to look after them until they reach 18. This clause will only take effect if there is no-one else with parental responsibility to look after your children at your death.
Parental responsibility is governed by the Children Act 1989 and is defined as “all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and [their] property”.
The law surrounding who has/who can acquire parental responsibility is complex, so it is important that you seek legal advice if you are not sure how it applies to your children. Briefly, those who usually have parental responsibility include birth mothers; fathers and second female parents who were married or in a civil partnership with the birth mother when the child was conceived or born; and fathers who marry or enter a civil partnership with the child’s birth mother after the child is born. Unmarried fathers do not automatically have parental responsibility, but it can be acquired, for example, by being named on the child’s birth certificate.
Given that the role is such a great responsibility, you should speak to your proposed guardians before appointing them, to ensure that they are happy to undertake the role. You can appoint a person or people as your main guardians and substitutes or successor guardians who would only act in the event that your first choice could not.
As well as speaking to the guardians, you should leave them detailed guidance in a letter of wishes. This document is separate from your will so it can be updated whenever you wish. It is confidential to your guardians and should contain all the important details of how you would want your children to be cared for and brought up, such as guidance about where your children should live, schooling, activities, religious guidance, financial help and anything else that is important to you.
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