So many people go through life living for the moment, which a lot of self help and personal development authors promote. Andrew Pearson, Dynamic Estate Planning, points out in black and white, the dangers of not preparing for the future.
As I was starting to pen this blog the other day, I was browsing through my Linked in page and there was a very personal piece from an accountant. It explained how he had been unintentionally disinherited by his father when he was a young child. His dad had left everything to his wife (stepmother to the accountant), trusting her to do the right thing by his son. She in turn left everything to her family on her death and the door closed on the boy.
This is just one example of how Mirror Wills, written with the best of intentions, can unintentionally be the most dangerous of documents. In the accountant’s case, the danger is clear as his father had already remarried, but dangers surround basic mirror wills even between natural parents of children.
To emphasise the dangers, let me give you some examples using my own situation (rather than killing anyone else off!);
Whilst I am sure that my wife is worthy of half of what we have amassed together (in fact I am sure she would say “at least”), I will preface this “without prejudice”! I would also add that killing her off first in these examples, is more a commentary on men’s need for relationship and their innate inability to look after themselves :)
1. My wife Kath dies and after a while I meet someone and remarry.
Simply by marrying I invalidate my previous will and if I die without writing a new will, the law of intestacy would pass all, or a large proportion of my estate (including Kath’s share) to my new wife, thereby unintentionally disinheriting my kids. I am pretty sure that is not what Kath would have wanted to happen to her share of our assets and to our kids.
2. Kath dies, and I remarry but fed up with being told “that’s not how Kath used to do it.”
my new wife divorces me, and I lose half my estate in the settlement, thereby unintentionally disinheriting my kids. Again, not what Kath would have wanted.
3. Kath dies, and I remarry, but my kids and my new wife don’t get on.
Knowing where my bread is buttered, I side with my new wife. Relationships get so bad I intentionally disinherit my kids. Certainly not what Kath would have wanted.
4. Following Kath’s death, I have a bit of a mid-life crisis and go on a spending spree,
or, consumed by grief I let things go and get into financial difficulty leading to bankruptcy, thereby losing most of my estate and unintentionally disinheriting my kids. Whilst Kath would want to ensure I am provided for if she died before me, she would also ultimately want to provide protection of assets for our kids.
5. Kath and I live to old age until I go into care (see bad things happen to me as well!).
Eventually Kath dies and as the house is now solely in my name, it must be sold to pay for my care fees, leading to depletion of our estate and disinheritance of our kids. Could there have been another way to avoid this?
6. Inheritance tax –in the past this has been viewed as a voluntary tax.
The nil rate band, upon which you pay 0% tax, has not risen since 2009 and will not until 2020/21. The new residence nil rate band does provide some mitigation, but not for everyone and, unless used cautiously, can leave your assets prey to all the financial predators outlined above. Equally the tax take from IHT has increased to 5.1bn in the past 7 years and there has been a 160% increase in the number of families paying this “Voluntary” tax. Are there things Kath and I could have done to reduce this potential cost?
I am sure we can all identify with one or several of the financial predator scenarios above. What we don’t necessarily appreciate is that these financial predators do not just affect us, but can also impact on our children, just at the point they inherit directly from your basic mirror will. And so, the ever-decreasing story of your family inheritance continues. With 42% of marriages ending in divorce, it is no wonder there are now more divorced or separated couples than married. There is also a rise of co-habitation where there may be children from two or more relationships. Basic mirror wills that leave everything to the survivor and then directly to our kids, makes these financial predator scenarios a reality.
If these scenarios resonate and concern you, there are estate planning options that provide the protection you seek, so don’t leave things to chance, choose to have a free initial consultation with me and get informed.
Andrew Pearson, Company Director, holds the STEP Advanced Certificate in Will preparation for England and Wales
Dynamic Estate Planning
16 Dimple Park, Egerton,
Bolton BL7 9QE,
Contact: Andrew Pearson
Dynamic Estate Planning