Multiple Marriages Cause Inheritance Issues
With more and more people getting married later in life, sometimes for the second and possibly for the third time, it can have an inheritance impact on the dependants of previous marriages.
Data from the Office for National Statistics (ONS) shows the number of brides and grooms aged 65 and over went up by 46% in a decade, from 7,468 in 2004 to 10,937 in 2014.
Furthermore, the ONS research shows 92% of the brides and grooms aged 65 and over in 2014 were divorcees, widows or widowers, with only 8% getting married for the first time.
This research indicates that there could be children from a first marriage that would need protecting financially. When starting a new relationship for the second time or even a third time it can bring new responsibilities as more often and not they will already have a family of their own.
As more older people get hitched for the second (or third time), there could be inheritance issues to consider ensuring both the second (or third) spouse and children from an earlier relationship are fully protected.
Making a Will ensures your loves ones are provided for once you have passed away. But 25% of UK adults over the age of 55 have not made a Will according to ‘The Will writing Industry in 2018 report’. Furthermore, only an average of 34% of people between 35 and 54 obtain an up to date Will. Of more concern though is that only 26% of parents with children under the age of four years old have a Will too.
However, another tax efficient method other than a Will is to set up a Trust – which secures assets (such as money) for people to access at a set point. An example of this is to put away money in a trust for children once they reach a certain age, such as 18 or 21 – which is an age people feel they are mature and responsible enough to inherit the money.
Research by the Society of Trust and Estate Planners found more than half of members have seen an increase over the past five years in customers using Trusts.
STEP says a trust can, for example, be used to provide for a spouse after death, while also protecting the interests of children from a previous marriage or relationship.
Consequently, putting money in a trust can also be beneficial for inheritance tax planning as it means the money no longer belongs to the person setting up the trust so it will not form part of the estate on death, thus, reducing inheritance tax bills.
It is important to make a Will and/or trust when getting married as if the relationship was to breakdown it can have a huge impact both financially and emotionally – and especially crucial to update an existing Will when a new relationship begins following a divorce from a first or even second marriage.
Recently, the Government proposed to reform the legal requirements for divorce as under current law in England and Wales, couples must either live separately for either 2 or 5 year period before they can divorce, or spouses have behaved unreasonably in such a way that they are unable to live with them. However, this is sometimes perceived as showing that a spouse is “at fault”.
The Government’s family law reform proposes to shift the focus from blame and recrimination to support adults better by focusing on planning for their own futures and for their children’s.
Due to the complexities of modern family relationships and changes in life circumstances, having a Will in place and updating it on a regular basis is vital as otherwise no provision would have been made for children from previous relationships – which could also lead to more inheritance claim cases going to court.
As a Will writer, are you seeing more older clients updating their Wills on a regular basis due to getting divorced or for other changes in life circumstances? Have you seen an increase in clients using Trusts?