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Complex Families – Is Simple Estate Planning Possible?Written on May 14, 2019 by Kirk Rice LLP

Complex Families – Is Simple Estate Planning Possible?
Taxing Times Questions

The Question:

I have been divorced and now living with my new partner and we have 2 children together and 2 from my previous marriage each. We are wondering what we should do about planning for them in the event of our deaths as it seems very difficult to contemplate. What advice can you give for more complex families like ours?

Kirk Rice LLP answers:

You are not alone in struggling to come to terms with this dilemma. How wealth is distributed on death under the legal system, known as intestacy, when you do not have a valid Will may not be how you want your wealth distributed, highlighting the potential conflict between the legal and the desired outcome. Clearly this is more complicated in complex family situations. Where I refer to marriage and spouse this can be taken to apply in civil partnerships too.

If you were married, then all your wealth could go to your spouse, which may not be what many people in your situation want. However, being married does simplify one serious aspect, that of inheritance tax. Where assets pass to spouses at death, no inheritance tax is payable on that value.

As you are not married, then your estate will be assessed for inheritance tax and that liability paid before any distribution can take place. The implications of inheritance tax are an area a financial adviser should have a good understanding, but I am not intending to cover in this answer.

I have some general points which follow, and I trust will help you, but you will usually need the expertise of a professional Will writer to ensure you achieve what you want to happen. I can assist you to find a suitably qualified Will writer if you wish and to assess what might happen to pensions and investments.

First stage is to discuss – talk openly with your family about what you would like to happen on your death.  The subject is often taboo, but those that do find it liberating. Some family members may not like what they hear either, so think about how you’ll manage that situation. Unless those conversations take place, it may be difficult for family members to understand what their loved ones may want.

Review your pensions and nominate beneficiaries carefully.  Money in pensions does not become included in your estate as long as you nominate suitable beneficiaries. Therefore, it is not assessed for inheritance tax, however, if the value of pensions is more than £1,055,000 a reclaim of tax relief can reduce the amount passed on. A financial adviser can help you assess and suggest suitable strategies to mitigate this.

Look at the ownership of the property you live in or own. A jointly owned property will pass automatically to the survivor (irrespective of any Will) whereas solely or partly owned property will be included in your estate and you need to distribute by a Will. People with many properties may own these within a limited company so that they actually own shares which they can pass on in any proportion they desire to others. This may be an area where the advice of a tax planner will be essential.

Decide if you have investments or other cash, which you can afford to give up entirely; or give up future growth or retain an income from. There are a number of trust structures which will enable you to achieve a specific aim of growth, access or income, whilst ensuring the right people receive the money on your death without needing a Will.

Do you have or should you consider a life policy to put money in the hands of your first set of children, who might otherwise not be able to receive anything until both you and your partner die.  Any existing policies can be passed into a trust which will ensure the money does not go into your estate and reaches your chosen beneficiaries. A financial adviser can help you with trusts.

Whatever you decide can be done, it will be essential to write a Will as I mentioned earlier as this will provide your loved ones with guidance about what you wish.



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Any reader who would like to discuss the estate planning for complex families can telephone 01344 875 000 to speak to our tax departments in London, North Hampshire or Thames Valley or email info@kirkrice.co.uk

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.