With increasing rates of re-marriage and the resulting blended families, parents need to take action if they wish to protect inheritance for children from a previous relationship.
Any fans of the mega-hit TV series Succession, which follows the fortunes of the Roy siblings, will know how fraught inheritance issues can be when there is no clear inheritance plan in place, especially when multiple spouses and step-families are involved.
But it is a story that is not restricted to the super rich like the Roys, as rising numbers of re-marriages are creating more blended families and are leading to inheritance disputes.
According to latest figures from the Office for National Statistics, almost 30% of marriages are now second or subsequent marriages. Behind the figure is a growing complexity in family structure, with step-mothers, step-fathers, step-children and step-siblings.
In a recent inheritance challenge which was upheld, after divorce, the Colicci’s signed a deed where they covenanted that any shares they still held in their jointly-owned company would pass to their two children when they died, and both promised to make Wills to support that. But the husband had remarried and later made a new Will leaving his shares to his second wife, not telling his ex-wife or children what he had done. When he died unexpectedly shortly after, his later Will was challenged successfully, as the Court ruled that the original deed was a binding obligation which prevented either of the parents from making other arrangements to dispose of their shares on death.
In another recent case to reach the High Court, three siblings found themselves cut out of their inheritance when their stepmother changed her Will in favour of their stepbrother, after their father died.
The McLean couple had made what are known as ‘mirror wills’ in 2017, where each reflects the other, so no matter who dies first the outcome should be the same. Those wills shared the couple’s estate equally between four children, three from Mr McLean’s first marriage and the younger son born during their marriage. When the older siblings found themselves cut out of the later will, they went to court, claiming that their father had trusted his second wife “implicitly” over the terms of the inheritance and purporting they were “mutual” wills.
Mutual Wills are when two testators want to agree, irrevocably, on what is to happen to their joint assets. There is an agreement between the couple to make Wills with substantially the same terms and conferring reciprocal benefits, and to not revoke them without the consent of the other.
The Court held there was no contractual agreement in place and the three step-children were disinherited.
It should be noted that a major disadvantage of mutual Wills is the lack of flexibility as circumstances can and do change, particularly if there is a long time between the deaths of the two testators. Mutual Wills restrict testamentary freedom and the survivor’s ability to lifetime plan or take advantage of more favourable legal or tax advice or changed legislation. As a result, mutual Wills are rarely made.
We would advise against making mutual Wills, and instead will advise on more suitable alternative options. Proper planning can help leave everyone satisfied, and decisions will depend on individual circumstances.
A more popular option is to create a trust within a Will. This can be a simple and effective way to make sure that the surviving partner has all they need while alive, but at the same time making sure that children from an earlier relationship do not miss out. It does require specialist help to get things right, but it means you can be sure things will play out as you intend.”
A trust can allow for each partner to leave their estate, or the bulk of it, in trust for the survivor, and then to their children following the survivor’s death. This allows for use of the assets – such as a house or investment income – to support the survivor for the rest of their life, but with the assets held in trust – whether for children from an earlier marriage or a charity or anyone else – when the survivor dies.
At Whitehead Monckton we have an experienced team who can advise you further. If you wish to discuss any of the points in this article, please speak to a member of the team today.
This is not legal advice; it is intended to provide information of general interest about current legal issues.