Using your Will to ring-fence assets

According to the Office for National Statistics in 2010 one-third of marriages ended in divorce within 15 years after the marriage, as compared with one-fifth back in 1970.

If you have a new spouse (or partner) as well as children from a previous marriage then you may have a real dilemma. On the one hand, if you leave by Will your estate to your spouse, there is no guarantee that your estate will eventually pass to your children. This because your spouse may change their own Will after your death, cutting out your children. On the other hand if you leave your estate to your children they may not allow your spouse to live in your house or use your assets.

These difficulties may be overcome by including a ‘life-rent trust’ in your Will. Such a trust can enable your spouse to have the use of your assets during their life-time but so that upon their death those assets pass to your own children. For example, your spouse may be granted the right to live in your house (or your share of it) on condition that they pay the usual outgoings and keep it insured and in reasonable condition, with the assurance that after their death the house will pass to your children. Similarly you can set aside a sum of money so that the income is paid to your spouse, leaving the capital intact for your children.

Life-rent trusts can also protect assets from future care-home fees. If after your death your spouse requires residential care they may potentially have to use their own capital assets to meet the fees involved. However if your share of the family home or other assets are left to your spouse in a life-rent trust, so that they have a right only to the income or a right of occupation, this may be sufficient to ring-fence your assets from the home-fees incurred by your spouse and preserve them for your children.

To ensure that a life-rent trust is effective where a jointly owned house is involved it is essential to have the title deeds checked. If there is a ‘survivorship clause’ in place, which would over-ride the life-rent trust, it must be removed when making your Will.

It is perfectly possible to include – or exclude – stepchildren from benefitting under a life-rent trust, and it is sometimes helpful to leave with your Will a private letter addressed to your family explaining the reasoning behind your decision.

If you have any queries regarding the issues referred to in this article please contact our Private Client Department.

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