3 helpful estate planning tips for blended families

Blended families can be vulnerable to inheritance disputes when a person passes away. Discover three estate planning tips for a smooth transition of assets.

The shape of the “traditional” British family is continually evolving and “blended” families – in which one or both partners in a marriage have children from prior relationships – are becoming increasingly common.

Indeed, the most recent data from the Office for National Statistics (ONS) has shown that in 2021, 8.8% of dependent children in the UK, equalling 1.1 million, were living in blended families. 

However, while combining families can bring great happiness, ensuring that everyone is taken care of if anything happened to you or your partner may require careful consideration.

Children from blended families may be vulnerable to “sideways disinheritance”, which occurs when beneficiaries do not inherit their intended share of an estate due to remarriage. For example, if your ex-spouse remarries then passes away without making a will, your children’s intended inheritance is likely to be transferred to their new spouse in its entirety.

So, if you’ve made a life with a new partner and one or both of you have children from a previous relationship, you may find the following estate planning tips helpful.

1. Make sure that your will is up to date and review it regularly

Reviewing your will regularly, or at least each time your circumstances change significantly, could help ensure that your wealth is distributed as you intend when you pass away.

On the other hand, if you haven’t updated your will recently, it may not reflect your current wishes.

For example, if you’ve remarried, your spouse would usually inherit your estate unless you stipulate alternative arrangements in your will. This means your new spouse is under no legal obligation to share your wealth with any children you have from a previous relationship. So, your children could effectively be cut out of your inheritance.

While most of us would like to imagine that our families would share assets equally, recent data from the Personal Finance Society (PFS) states that 3 in 4 people will experience a will, probate, or inheritance dispute in their lifetime.

So, keeping an up-to-date will could help you protect your wealth and ensure that it is passed on to your intended beneficiaries. You might also benefit from speaking to a financial planner who can advise you on creating a comprehensive estate plan that puts your wishes at the heart of the conversation.

2. Consider putting some assets in a trust for your children

You might choose to set up a trust to protect your assets and ensure that they are passed on in the way you want, especially if you have children from multiple relationships.

There are several different types of trust that may be helpful when estate planning for your blended family. Your choice will depend on your specific circumstances and what you need the trust to do.

For example, you might set up a life interest trust to provide an income for your surviving spouse until they pass away. Alternatively, you could opt for a discretionary trust that allows you to distribute your assets to multiple beneficiaries.

The rules around trusts are complex. A financial planner can help you determine which type of trust is most suitable for your family’s unique estate planning needs.

In fact, trusts offer several benefits:

• They could help ensure that your spouse and children are provided for.
• Assets placed in trust may be liable for a lower rate of Inheritance Tax.
• You can decide how your assets are used.

Using trusts to pass on your wealth – along with a carefully written will – could be an effective way of avoiding sideways inheritance.

3. Discuss your intentions with your family

You might feel uncomfortable talking about financial matters with your family, and the subject of inheritance can be especially emotive.

However, discussing your intentions could be an important part of creating a plan that provides peace of mind for you and your loved ones. If possible, it may be helpful to include any ex-partners who you share children with.

Talking openly about your estate plans could allow you to:

• Set expectations and make everyone feel included
• Reduce stress for your loved ones when the time comes
• See things from your family’s perspective
• Gain peace of mind that your wishes will be fulfilled.

Remember that estate planning isn’t just about passing on your assets, it’s also about making your wishes clear regarding later-life care, guardianship of your children, and other important matters.

If you’re finding these conversations difficult, a financial planner can act as an objective sounding board and mediator for you and your blended family. This could help you all to calmly discuss your options and agree on a plan that ensures everyone’s needs are catered to.

Get in touch

If you’d like to learn more about how to create an estate plan that caters to your blended family, I can help.

Please get in touch either by emailing lottie@truefinancialdesign.co.uk or by calling 07824 554288.

As a new mummy, I will be on maternity leave until July 2024, so I appreciate your patience until I am back at my desk.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.