Legal challenges faced by a blended family

As a result of social change over the last few decades, the term ‘blended families’ is now used to describe families that include children from previous relationships as well as the children of the partners.

We are regularly asked how someone can structure their affairs on death to cater for blended families and this article considers the use of Wills to achieve that.?

Estate and succession planning

Putting a clear Will in place is a crucial part of estate and succession planning. Dying without a Will (i.e. intestate) could mean that what you want to happen to your estate does not happen at all.

Although the rules of intestacy are rarely ideal, the rules can be particularly unfavourable where there is a blended family. Only biological or adopted children can inherit under the rules of intestacy; a stepchild cannot. Express provision must be made for them in a Will.

Let’s take this common family scenario as an example:

H & W are married and have each been married before. H has a child from his previous marriage, child A, as does W, child B, and H & W have a child together, C.

?It would not be unusual for H & W to make Wills leaving everything to one another absolutely on first death and, on the death of the survivor, their Wills provide that their children A, B and C are to receive an equal share in the estate. At face value, this arrangement seems sensible and ensures the survivor is financially provided for and that the spouse exemption for inheritance tax (IHT) purposes is used so that there is no IHT liability on first death. However, if H dies first, his entire estate will pass to W who could, for example, change her Will to benefit B and C only and disinherit child A.

Using the same example, following H’s death, W may go on to remarry and, although she may not intend to change the arrangements agreed between them, her marriage will revoke the Will made when H was alive. If she does not take steps to make a new Will after her remarriage, she would die intestate. As mentioned above, A is her stepchild (unless she had taken steps to adopt them during H’s lifetime) and, under the rules of intestacy, child A would not inherit anything from either estate.

This leaves all parties in an uncertain position and can be improved upon.?

Life interest Will trusts

The most common type of Will used to cater for the requirements of a blended family incorporates a life interest trust.??

Using the above example, H & W would leave Wills granting the other a life interest over their assets. They would decide what assets form part of the trust and the survivor would benefit from those assets by having the right to use them or the income arising from them, during their lifetime. A carefully drafted letter of wishes can also provide crucial guidance to the trustees.?When the beneficial interest ends, usually on the survivor’s death or earlier remarriage, the trust property passes to the children (A, B and C) in whatever proportions they agree under their separate Wills. The spouse exemption for IHT will still apply so that no tax liability arises on first death, but the capital value of those assets is protected for the benefit of their children. ?

If W remarries and/or changes her will after H’s death, the share of the assets passing into the trust on H’s death would still pass to the children as he intends.

Mutual Wills

A much less common way of catering for blended families and other difficult situations is to use what are termed “mutual Wills”.?These are not simple “mirror Wills” – where the two Wills broadly mirror each other.?

Mutual Wills are made by two parties who agree that they will not, in the future, change their Wills without the consent of the other.?When one party to the arrangement dies, the survivor’s Will is irrevocable.

They can be used in similar situations to the above example i.e. where one party is concerned that after first death the survivor would remarry and could potentially disinherit one or more of their children.?

Mutual Wills are, however, inflexible by nature and often not well suited for young couples whose circumstances may change considerably over the years.

It is also worth bearing in mind that a number of cases have determined that mutual Wills can be created even where they are not explicitly stated to be mutual Wills.?In these cases, the surrounding evidence suggested that the Wills were intended to be irrevocable.

Summary

Increasingly we see the need for a sophisticated approach in Will planning, often due to the need to cater for blended families.?

Simple mirror Wills are unlikely to give the certainty that the two parties require and can lead to litigation after death and the breakdown of family relationships.

Whilst mutual Wills have a theoretical attraction, they are inflexible by nature, often unsuitable for younger couples with many years ahead of them and involve various legal difficulties in practice.

A more flexible approach is through the use of a Will incorporating a suitably drafted trust to protect the assets of the first to die so that they can be sure that the capital value will eventually pass to their children. ?A carefully drafted letter of wishes to guide the trustees will be an important document.

It will be important for the two parties to have an open discussion about these arrangements and, dependent upon ages of the children, circumstances and quality of relationships, it may be appropriate for the whole family to be aware of their intentions.

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Jen Morries is a senior associate at Meridian.?A member of STEP and Solicitors for the Elderly, she has extensive experience on a broad range of private client matters related to estate planning, succession planning and advice related to cross-border issues.?

This information does not represent legal or tax advice. Seek appropriate legal or tax advice about the topics covered, specific to individual circumstances, before taking or refraining from any action