Feb 20

The rise of the blended family: how to plan for the future

Written by Jessica Toller
Associate

DDI: 01423 726606
E: jessica.toller@raworths.co.uk

In recent years, the term blended families has had increased media exposure. Blended families occur when two people get married, perhaps for the second or third time, usually later in life after already having had children.

In these circumstances, it is prudent to plan and put provisions in place to protect both the new blended family and your children – but this can often be a balancing exercise or based on trust.

Take the example of Ross and Rachel. Ross was previously married and had a son called Ben. Following his divorce he had his daughter Emma with Rachel who he later married. A common choice would be for Ross and Rachel to make mirror wills leaving everything to the survivor of the two of them and then to Ben and Emma equally. Unfortunately however there would be nothing to stop Rachel later changing her will to leave everything to Emma following Ross’ death and leaving Ben nothing.

Almost everyone will have heard the usual warning story of late second marriages, take the example of Monica and Chandler. Monica and Chandler were married and had twins, Erica and Jack. At 70 years old Monica dies leaving everything to Chandler with the belief that on his death everything will go to the twins. Chandler later marries his old flame Janice and neglects to make a new will. Chandler sadly dies and under the statutory rules, the bulk of his estate passes directly to Janice. Whilst Chandler may not have intended this to happen, as his marriage to Janice revoked his previous will, he was deemed to have died without a will in place to the detriment of the twins.

So what can you do to try and protect your assets whilst maintaining the new family unit?

Life interest trust

This is probably the most common method used which works by severing your assets with your spouse so you own them jointly but in distinct shares which then pass into the life interest trust on death. Should Ross and Rachel prepare mirror wills incorporating life interest trusts then on Ross’ death, Rachel would be allowed to benefit from his assets, i.e. receive interest from any investments and live in any property and then on Rachel’s death, Ross’ assets would pass to Emma and Ben equally.

Discretionary trust

On death, all of your individual assets would pass into the trust for the benefit of named beneficiaries. No-one would have any right to benefit from the estate, it is all at the discretion of the trustees who are guided by a letter of wishes. This is a very flexible route which you can mould to fit your circumstances. Using the second example above, on Monica’s death her assets would pass into the discretionary trust and the trustees could decide to allow Chandler to live in the property until his marriage to Janice at which point the property could be sold and Monica’s share could be invested to provide an income for Chandler, Erica and Jack.

Life insurance trust

For older children this can be a popular choice where you want to leave your whole estate to your spouse but you also want to benefit independent grown children. It works by paying for a life insurance policy to pay a sum of money on your death to named beneficiaries, or to a discretionary trust for the benefit of the named beneficiaries. Ross may choose to go down this route to provide for Ben to ensure that Ben receives a sum of money on Ross’ death whilst ensuring that Rachel and Emma are adequately provided for with the entirety of his estate.

Choice of trustees

For all of these options, the choice of executors and trustees will be crucial; they play a vital role in administering your estate and any associated trusts. To avoid any family arguments it can be useful to appoint different people from different strands of the family so everyone feels that they are being fairly represented.

If you would like to talk about creating or updating your will and the different options available to you, please call Jessica Toller at Raworths on 01423 726606

Published on 18 February 2020