Relationship breakdowns and squabbles over entitlement to a share of an estate are common and wholly avoidable. Nadine Wealands explains how by maintaining your Will to include a discretionary trust can protect your estate from future disaster.
Separation and divorce come in as the second most stressful life changing events after the loss of a loved one. Whether both parties agree or not, there are many things to consider – emotionally, legally and practically. Who lives where, how will finances be organised and if there are children how will custody be split.
But few consider their testamentary wishes and it is probably the last thing on either party’s mind during this difficult time, but considering whether a current Will is still adequate in the changing circumstances should be a priority.
If your relationship is ending, and you need help dividing your money and property or making arrangements for your children, amicable is a trusted legal service for separation and divorce. Unlike solicitors, amicable works with couples and offers a fixed-fee service that includes VAT to help manage all aspects of separation so that you can agree on the best way forward for your family and your finances. Get in touch to explore how they can help you separate in a kinder, better way.
Separation
Separation has no effect on a Will, because individuals are still legally married. The fact is that a spouse can still inherit their partner’s estate, irrespective of the length of the separation. If there is no Will in place, a spouse will inherit under a set of rules called the Intestacy Rules which dictates who inherits what and in what amounts. The rules state:
- If married without children the surviving spouse inherits the entire estate;
- If married with children the surviving spouse inherits all personal belongings, further assets up to £250k (which can include property). The remainder of the estate is divided into two equal shares with the surviving spouse taking one share absolutely and the remaining share passing to any surviving children.
Divorce
If divorce proceedings have been initiated then this is the time to reconsider any existing Will, or indeed it will be the time to create one. Careful consideration needs to be made about appointing executors and trustees and guardians for infant children and even providing for your spouse. Whilst still married the surviving spouse will still inherit the estate in accordance with a Will, or under the Intestacy Rules.
Protecting your estate until such time that divorce is finalised and financial matters are resolved should be a priority.
Discretionary Trusts
A discretionary trust is a useful tool included in a Will that protects from future disasters. This could be failing relationships and financial disasters, or even beneficiaries who are simply not equipped to deal with a potentially large sum of money or extensive assets.
Assets: Some examples are money or property, which pass into the trust, which are managed by the trustees who are appointed within the Will. Usually executors and trustees are the same, and they decide, at their absolute discretion, who will inherit, what they will inherit, when and in what proportions. Your named beneficiaries are “potential” beneficiaries and can include persons not yet born, for example grandchildren or great-grandchildren. A side note should be created to give your trustees an idea of how the assets should be distributed or held back, so as to assist them in any decision making. It is important to remember that this note is not binding in any way; it merely gives guidance, so careful thought should be used when appointing trustees.
So why use a trust on separation or divorce? It protects family wealth during this uncertain time if death occurs before divorce is finalised, or financial matters are brought to a conclusion. Trustees can see that any financial settlement that would have been agreed for the surviving spouse and potential claims that reasonable financial provision was not made for the surviving spouse under the Inheritance (Provision for Family and Dependants) Act 1975 can be avoided.
For more information about how you can protect your estate against unexpected change, seek professional legal advice about discretionary trusts.