If you have considered writing a will, it is probably to make sure your assets pass to your children. A simple will can say something like “I leave everything to my spouse, but if I die sooner, I divide my estate equally among my children.” Work well done?
While technically the answer is yes, reality is fraught with dangers and the inheritance you wanted your children to have can be diluted or even disappeared in various ways. Here are four scenarios that illustrate how this can happen.
Let’s say you have two children, Jenny and Peter, who each receive 50% of their estate:
Scenario 1
Jenny gets divorced. Now it is likely that half of the inheritance you left Jenny will give to her ex-husband as part of the divorce agreement.
Scenario 2
Peter runs his own business successfully, but when the market changes, Peter’s business struggles and his company goes into liquidation. The entire inheritance left to Peter is now at risk to his creditors and will likely be taken as part of the bankruptcy proceeding.
Scenario 3
Peter and Jenny are doing very well financially for themselves and both are approaching the inheritance tax threshold with accumulating their own assets.
Each would love to use the inheritance they received from you to provide something special for their own children. If something happens to Jenny or Peter after receiving their inheritance, but before they have time to put something in place for their grandchildren, 40% of their inheritance is now lost in inheritance tax.
Scenario 4
You die and your spouse survives you, who then remarries. Your spouse does not update their will, then dies and (through intestate laws) leaves all of their joint assets to the new spouse by default. Your children now inherit nothing.
All of these scenarios can be planned and provisioned so that Jenny’s ex-husband receives no money when they divorce, Peter’s inheritance is protected against bankruptcy, his grandchildren are protected from paying inheritance tax on his bequest, and his children arrive. to at least your share of the inheritance in the event your spouse remarries.
conclusion
Unfortunately, these four scenarios happen every day in the UK. Make sure it doesn’t happen to your family. Get the right kind of will.