Month: November 2019

Q: My wife and I want to write our Wills. We have two young children.

I want to make sure that if I die before my wife that she gets the money but if she remarried and then died, my half would end up with my children and not with any new spouse or children that he had either with her or previously.

She does not want to put the half in trust as this could stop her moving house and she could need it. I am concerned that if she became incapacitated that a new spouse could gain power of attorney. 

How can I safeguard so that any new husband would not take advantage of the rewards of what we have accumulated and at some point my children will get at least the share from my estate?

A: Despite your concerns about trusts, the best way to achieve your objective is by the use of protective and flexible trust structures incorporated into your Wills.

If you were to arrange for your assets to pass into a life interest trust for your wife’s benefit, this would ensure that she has the right to the income generated by any funds as well as to occupation of any property held in trust. The underlying capital would be protected for the benefit of your children.

To achieve maximum protection, you should ensure that any joint property is held as tenants in common so that your share passes according to the terms of your Will and into the trust structure.

This of course means that your wife’s main residence is likely to be owned partly by her personally and partly by the trust. This poses no problem for her ongoing occupation but she may of course want to move properties at some point in the future.

You should choose trustees who would understand  your wife’s wishes and able to work with her, but robust about protecting your children’s interests

She can be assured that this is entirely possible within this type of structure and shouldn’t cause any undue difficulties. The trustees of the life interest trust can purchase a smaller property for her occupation, thereby freeing up some of her own funds or could continue to part own an appropriately chosen property.

In this situation your wife will not be able to make the sole decision about the future of the property but she can be one of the trustees and therefore involved in the decision making process.

This type of trust can also contain flexible powers so that the trustees are able to make capital distributions to your wife if appropriate (and bearing in mind your own wishes) or advance capital to the remainder beneficiaries.

This should give her some comfort about her future financial security.

Alternatively, the trustees could appoint capital during your wife’s lifetime to the residuary beneficiaries. This would of course be subject to your wife’s approval if she was one of the trustees.

If you choose not to incorporate trusts into your Wills but instead make an absolute gift to your wife on your death, the assets will be added to her own estate. Once that has happened, it will be nearly impossible for you to exert any control over their eventual destination.

If your wife remarries, any existing Will would be revoked and she is free to make a new Will giving whatever she pleases to her new spouse. If she dies without a Will, the intestacy provisions would give the first £250,000 of her estate (and personal belongings) to her spouse, with only half of the residue going to the children and the remaining half to the spouse.

Your wife may also wish to protect the capital for your children in these circumstances and could take steps to do so, such as entering into a pre or post nuptial agreement but this does depend on her taking positive action at the appropriate time.

If your wife became mentally incapacitated, any power of attorney (whether an old style Enduring Power of Attorney or a new Lasting Power of Attorney) would dictate who would manage her financial affairs.

If none, an appropriate person could apply to the Court of Protection for a deputy order. While this may undoubtedly give a new spouse acting in this capacity a level of power over your wife’s finances, the use of such power is restricted and heavily scrutinised for any abuse.

The ability to make gifts or distribute assets is limited. If your children suspected that the new spouse was using the funds for his own benefit and against the wishes of your wife, they could take action to prevent this abuse.

To conclude, the use of appropriate Will trusts is likely to be the best means of achieving your aim of providing for your wife for the remainder of her life but protecting the funds for your children in the long term.

Most importantly, Where a testator gives a life interest in a property to a spouse, then no IHT will be due upon first death due to the spousal exemption under section 18 IHTA 1984, and tax may be due upon second death as the property/share of the property will be treated as part of their estate for tax purposes.

And the moral of this story is…

If there is a lesson to be learned from the above tale, it is this:

• It is a good investment to obtain sound Estate Planning advice.

I have been a qualified solicitor since October 2003, and solely work in Estate Planning law. I work with financial advisors who wish to offer this service to their clients as an added value and opportunity to increase their fees.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.