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Charlotte Cooper, Moon Beever's Wills, Trusts & Probate solicitor highlights how to protect your children's inheritance. 


With the increase of second marriages or partners deciding not to marry at all, family models are becoming more complex and succession planning on death may be vitally important to ensure that your wealth passes to your desired beneficiaries.

People often draft wills including outright gifts without thinking about the full consequences. It is important to appreciate that outright gifts to spouses/partners and children in a will may not benefit your beneficiaries in the way intended or assumed.

Let us look more closely at some of the potential problems before considering why will trusts may be a more effective mechanism to include in a will instead of an outright gift.

Risk: an outright gift of your wealth to your spouse/partner in your will

Often couples want to provide for their surviving partner during their lifetime before their wealth is passed to their children. However if you have children from a previous relationship and leave your wealth to your new partner in a will, how can you guarantee that your partner will leave any of your wealth to your children?  Your partner may remarry or have further children with a new partner and they remain free to change their will as many times as they wish until their death (subject to capacity etc.). An outright gift to your partner in your will provides no guarantee that your children will benefit at all from your wealth.

In addition, if your partner dies without making a will themselves or if they revoke their will automatically upon remarriage without making a further will, your partner’s estate will pass under the automatic statutory intestacy rules. If you have children from a previous relationship, they will not benefit since step children are not included in the intestacy rules.

Risk: an outright gift of your capital wealth to your children in your Will

If you leave an outright gift to your adult child in your will and if on your death your child’s relationship with their spouse has come to an end, the monies received by your child from your estate may be taken into consideration during the divorce proceedings. With the average marriage lasting twelve years, many parents want to prevent their hard earned monies passing to their adult children’s ex-wife or husband.

In addition, if in your will you leave an outright gift to your children, how can you be sure that your child is going to be capable of managing the funds in a mature manner especially if you die sooner than expected? With an increase in material spending among young adults, many parents no longer consider 18 years of age to be an appropriate age to receive capital monies on death.


1.   Include a life interest trust in your will

One option is to draft a life interest trust into your will. The trust is set up on your death and provides for income to be paid to your partner for the remainder of their lifetime. The capital is protected and upon the death of your partner passes in accordance with your directions, for example to your children upon turning a certain age or into a further trust. This life interest trust ensures that you retain control of your wealth and ensures that your wealth ultimately passes to your chosen beneficiaries.

If you would like to give your partner the possibility of receiving capital monies in addition to income, powers can be included in the trust to allow the trustees to consider whether capital monies should be used to benefit your partner. It is important to choose the trustees carefully to ensure they act impartially and in the beneficiaries best interests. Sometimes it may be appropriate to appoint a professional trustee.

It is also possible to create a life interest trust of your property in your will. You can allow your partner to remain living in your property after your death until they die, remarry or until the end of a chosen time period. Once the life interest trust has come to an end, the legal ownership of your share of the property can then be transferred to your chosen beneficiaries. However, if you own your house jointly with another individual as joint tenants, your share of the property will automatically pass to the surviving co-owner when you die regardless of the terms of your will. If you want to ensure that your property passes into a life interest trust, it is important that you sever any joint tenancy and own your property as tenants in common so that your share can pass under your will.

2.  Include a discretionary trust in your will

As an alternative or in addition to a lifetime interest trust, a discretionary trust can be drafted into your will.  The trust is set up on your death and a discretionary trust is the most flexible form of trust and allows the trustees to distribute income and capital to your partner and children at the same time depending on their individual requirements.

One of the features of a discretionary trust is that no one beneficiary is absolutely entitled, so monies in a discretionary trust are often better protected from your child’s divorce settlement compared to an outright gift your child. Accordingly, providing the trust is drafted and administered in an appropriate manner, a discretionary trust can provide a great deal of reassurance against the possibility and consequences of a marital breakdown.

In addition, the trustees decide if and when income and capital monies are to be received by your beneficiaries and your trustees can wait until your child is capable of managing money maturely before distributing large sums. The trustees can also assess whether there are there are mental health issues or issues with money management and in these circumstances, it may be beneficial to give regular income payments rather than large sums of capital.

The discretionary trust should be supported by a letter of wishes to the trustees setting out guidance as to how they should consider using their discretion.

It is also important to consider the tax consequences and any assets held jointly before commencing will drafting. For more advice on drafting a will please contact Charlotte Cooper or Richard Boulding.


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