Are you protecting your children’s inheritance?
There is a developing old-age crisis amongst millennials (those born between the early 1980s and late 1990s) as a generation hit with higher costs, huge debt and less opportunity to own property, few are successfully financially preparing for retirement.
Many are simply not saving at all, expecting an inheritance windfall from their parents. A recent Sanlam survey suggests that nearly two thirds are expecting an average inheritance of £233,000. That would mean around 11 million people are expecting to survive in retirement purely, or largely, from inheritance.
But this might not be the case. As people live longer, more resources are being swallowed up by care and living costs, and other legal factors mean that millennials may not receive what they are expecting.
If you have a ‘millennial’ child and want to ensure they benefit from your estate fully when you die, it is worth considering the following:
- What type of Will do you have?
There are different types of Will and this can affect the inheritance you leave to your children. A common type of Will in the UK is called a ‘Mirror Will’ where partners leave everything to each other, and then to their children. However, there is no guarantee that an estate will flow down to people in exactly that manner.
Going back to the point about caring for the elderly. For example, if you have a ‘Mirror Will’, if your partner requires care after your death, a means test will usually be conducted by the Local Authority to calculate if your partner can pay for their care themselves.
Under current legislation, both yours and your partner’s share of the assets will be used in assessing their ability to pay. Given that the average of care can be £600 per week (£841 for nursing care), your joint assets could be reduced quickly. As things stand at present, the Local Authority is obliged to contribute when your funds reach the lower limit of £14,250 (£ 17,000 in Scotland).
That said, aside from the issue of care fees, there are inherent risks attached to Mirror Wills. Either party is free to change their will at any time, which could be significant if, after death, your partner re-marries and passes their (your) assets on to a second family.
- Property ownership
If you own your home as ‘joint tenants’ each party owns an equal share of the family home. When one party dies, 100% ownership passes to the other party.
Alternatively, depending on your circumstances, it may be worth considering owning your property as ‘tenants in common’. This allows each owner to leave his share of the property to any beneficiary upon the owner’s death. This can help to reduce the risk of loss of inheritance. You might find this page on gov.uk useful to read: https://www.gov.uk/joint-property-ownership
- Dying without a Will
Intestacy rules state that if you die and are survived by a spouse or civil partner and have children, the spouse or civil partner will inherit any joint assets, the first £250,000, the chattels and half the remainder. The rest will pass usually to the children. Basically, make a Will. This is a simplification of the actual rules.
- How complicated is your relationship history?
Remarriage can open up a can of legal worms when it comes to inheritance. If your partner remarries following your death, their Will becomes invalid. Without a new Will, the estate will pass under the laws of intestacy mentioned above.
If they die before their new partner (assuming you both had children), the new partner may well inherit the bulk of your estate under the intestacy rules. In short, most of your hard-earned cash will end up in the hands of someone else’s children if this is where the new partner leaves it.
- How legally protected are your children?
Your children are set to inherit your estate, it’s simple, right? Not exactly! Even if they successfully inherit, they can still lose the cash in many ways. Take divorce for example. You’d think that your child would simply keep anything they inherited from you. But in these cases, courts will look at both parties and what they need. When there isn’t enough money to provide for both they can use any inheritance to meet all the needs, even if it comes from before the marriage.
A stitch in time
Although this all paints a very bleak picture, it can all be avoided with careful planning and seeking help and support from the right legal experts. With the right planning using things like Wills and trusts you can ensure that your estate can be administered in a manner that benefits your loved ones in the best way possible.
We’re here to help.
For more information or support, please contact Kenneth Curtis, Partner at Curtis Parkinson Solicitors on 0800 056 6042.
Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.