Page 78 - Solihull Living Nov/Dec 2019
P. 78

                 Who wants a second death lottery?
Many people in second marriages want to “keep things simple” and leave everything in
their Will to their spouse if they die first, and to their own children if they die second. This MIGHT not end in a row, but it is always best to think about all the options as there are good reasons NOT to follow this structure without first considering alternatives.
One consideration is if H dies first and leaves everything to W, W has then inherited H’s assets. When
W then dies (assuming she hasn’t spent the money) if she leaves everything to her own children, none of H’s money will have gone to his own children. H’s children will be less than pleased at this outcome. This is the second death lottery: whoever dies second, benefits their own family at the expense of the family of the first
to die.
H and W should consider providing in their Wills that on the death of the second of them, a percentage of their estate passes to H’s children and a percentage passes to W’s children. It will then not matter who dies first or second. This does of course need careful discussion and consideration as assets may have been spent during lifetime which could affect the percentages, but
Another consideration is protecting the assets of the first to die from being definitely taken into account for care fees funding for the survivor. If, for example, H leaves his estate of £400k all to W making W worth £800,000, then W has £800,000 of assets available to be spent on her care and it will take much longer for the Local Authority to step in than if W was only worth £400,000.
This might be what is wanted as paying for your care equals full control over choice, but H and
W should consider leaving their own £400,000 on first death into
a trust for each other. H can give W a right to live in his share of the house or right to the income from the £400,000 of assets if they are of a cash nature and vice versa by W. This is not a fail safe protection of H’s £400,000 from being treated as W’s by the Local Authority, but does add at least the possibility of protection.
H can also provide for his children to benefit from the capital in the trust on W’s death, so ensuring that his unspent capital will indeed pass to his own children.
Or H and W could use a discretionary trust so the survivor has no right to the £400,000, which offers more protection from the Local Authority, but may not be acceptable to the survivor and be seen as too uncertain by them.
Capturing tax reliefs is another important consideration.
If H and W hold shares in a business which qualify for business property relief, then this relief is “wasted” if those shares are left to their spouse as spouse relief means no Inheritance Tax is payable in any event. The shares could instead be
a discretionary trust. The spouse, adult children and wider family can be amongst the possible beneficiaries and so potentially receive dividends from the shares in the future. Or the shares can be bought by the other shareholders so cash is held in the trust instead.
Capturing the Nil Rate Band and Residence Nil Rate Band on first death also needs careful consideration.
No one situation will be the
same as any other and detailed knowledgeable advice should be taken to ensure that fully informed decisions can be taken as to how H and W wish to leave their assets in their Wills.
For advice please contact Laura Banks, Senior Associate Solicitor, Wills & Estates on 0121 796 4027 or
  a trust could be used to provide flexibility on second death.
 left outright to adult children or put into

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