If you have been married before and have children from that marriage, you may not have considered if and how you are providing for them after you die.
You may have made a will during your first marriage, or after you divorced leaving assets to your children so you think you are looking after them. However, many people do not realise that marriage revokes a will, so if you have married again you will no longer have a will in place. This means that all your money, belongings and property will pass under the Rules of Intestacy.
The Rules of Intestacy say that you are married, unless the estate is very large, your spouse will inherit everything. The danger of this situation is if you pass away and your new spouse inherits everything, they could leave all of the assets to whomever they want to. This would leave you children from your first marriage at risk of not receiving anything.
You can avoid this situation by making a new will and either making specific gifts to your children or by including a certain type of trust (known as an Interest in Possession Trust) in your will. This will ensure that your children receive something as well as your spouse.
As people live longer, people are becoming more concerned about whether they will need care in the future and how to pay for it. You may worry that you will spend all of your money paying for the care of a spouse or partner and have nothing left to pass onto your children.
If you are concerned about this, it is possible to include an Interest in Possession Trust) in your will to provide for your spouse or partner whilst ensuring that those assets pass to your children when they die.
A trust is a legal relationship whereby an individual (known as the “settlor”) transfers his or her money, belongings and property to another individual(s) or company (the “trustee”) who is responsible for holding and managing those money, belongings and property for the benefit of others (the “beneficiaries”)
A trust can be made during the settlor’s lifetime or can be created in a will to come into effect on death. Trusts are often used as a means of protecting family wealth and preserving assets for future generations.
Why do I need a trust?
As general rule, trusts are used to protect. Common objectives for trusts are to reduce any inheritance tax liability, to protect property in an estate being lost or reduced by care fees and to protect funds due to young or vulnerable beneficiaries.
In the case where there are children from a first marriage, there is a danger that they may not receive what they should as an inheritance so Property Trust Wills are a good way of providing for them as well as a partner or spouse.
What is a Property Trust?
A Property Trust is a certain type of trust (often referred to as an Interest in Possession Trust). It is usually used to protect the settlor’s interest in a property and the Trust is created in your will. The way you own your home needs to be checked to ensure that you own a distinct share which you can leave in the Will as you chose.
With a Property Trust Will, on your death, your share of the property passes into the Trust. The terms of the Trust are that the surviving owner can remain living in the property for the remainder of their lifetime (or any other terms that may be chosen). The trust is very flexible so it allows the surviving owner to move house and ensures the new property is also protected by the trust.
When are these trusts used?
The advantage of a Property Trust will is that the surviving owner has the right to live in the property for the rest of their life but the share of the property you owned is safeguarded to go to your children, or other beneficiaries you choose.
Additionally as the surviving owner only holds their own half share of the property, only that half share can be taken into account in assessing their liability towards paying care fees. The half share held in the Property Trust is disregarded in the assessment for care fees.
Thanks to Laura Ikin at NewLaw Solicitors for writing this page for us.
Next update due: June 2017