Are you protecting your children’s inheritance?

24 May, 2021 5 minutes reading time

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, protecting your child’s inheritance is crucial, and it is worth considering the following:

The Type of Will 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.

Consider the impact of care costs for the elderly. For example, if you and your partner have ‘Mirror Wills’ and your partner needs care after your death, the Local Authority will usually conduct a means test. This test assesses your partner’s ability to pay for their care.

Current legislation dictates that the Local Authority will include both your and your partner’s assets in this assessment. With the average cost of care reaching £600 per week (£841 for nursing care), your joint assets could dwindle rapidly. Currently, the Local Authority must contribute when your funds reach the lower limit of £14,250 (£17,000 in Scotland).

Beyond care fees, Mirror Wills carry inherent risks. Either party can change their Will at any time. This becomes significant if, after your death, your partner remarries and leaves their (and potentially your) assets to a new family.

How You Own Your Property

If you own your home as ‘joint tenants’ every 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 useful.

The Risk of Dying Without a Will

A surprising amount of people have made no Will at all. In fact, according to a recent Which? legal survey, 61% of adults haven’t. That’s a big problem if you happen to fall into that statistic.

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.

Complex Relationships

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.

Protecting 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 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 their 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.

Our Advice

For more information about planning for the future, please contact us. We’re here to help.

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.

Partnerships & Accreditations