The Cinderella Dilemma: Should I be protecting my children’s inheritance?
Inheritance disputes are on the rise. One of the reasons for this is a significant increase in the number of blended families. In this article we look at a problem we encounter on a daily basis; children missing out on the inheritance their parents intended for them due to the actions of a step-parent.
There are measures we can take to protect our children’s inheritance, but it does involve what might be an awkward conversation with our partner. So, should we trust our spouse and hope for the best? Or should we confront this potential problem and risk upsetting our partner? We are calling this the Cinderella Dilemma.
The Cinderella Dilemma
The pantomime season is nearly upon us and the wicked stepmother is preparing to take her annual bow. It’s all good seasonal fun. Who doesn’t enjoy watching the villain get their comeuppance and cheering when good finally triumphs over bad? The wicked step-mother, or wicked step-father come to that, is a work of fiction of course. More and more of us are becoming step-parents and while we might not be angels, we certainly aren’t wicked. But like many fairy stories this one has its basis in real life. Step-parents and step-children often have an uneasy relationship and nowhere is this more apparent than when it comes to money and in particular, inheritance.
It’s natural for us as human beings to want to do everything we can to ensure the security and happiness of our offspring. Having brought them into the world we feel a duty to look after them and this includes providing for them when our own mortality finally catches up with us. Our inheritance laws recognise this protective instinct. If we die without leaving a will, the intestacy rules give our children priority, ranking second only to any surviving spouse.
One of the most common wills we are asked to prepare for married couples is the ‘mirror will’. This is where both spouses make a similar and complimentary will. Typically each spouse names the other as their beneficiary, with the combined estate going to their children on the death of the last to pass away. In most cases this arrangement works very well and their children receive the inheritance that was intended for them. However, the desired outcome doesn’t always pan out. As the saying goes, ‘even the best laid plans of mice and men often go awry’, to which we could add, ‘especially when a step-mother or step-father arrives on the scene’.
For all its advantages, the one thing that a mirror will doesn’t really cater for is death and re-marriage. This can present a particular problem if one of the partners dies prematurely. Let’s look at a practical example. Assume, for the sake of argument, that the wife passes away and under the terms of her mirror will, leaves everything to her husband on the basis that his will benefits their children. He then remarries and sometime later passes away himself. Is the inheritance of the children of the first marriage protected?
In a word, no.
At the heart of the problem is the legal principle that marriage revokes a will. So as soon as someone remarries any mirror will they made with their departed spouse will be automatically revoked. This means that either a new will has to be made or the intestacy rules come into operation. Either way, the end result could well be very different to what was originally intended when the mirror wills were entered into.
If the husband didn’t make a new will when he remarried then the intestacy rules will allow his new wife (the stepmother in this scenario) to keep all the assets up to a value of £250,000 and all personal possessions, whatever their value. She will also get half of the remainder, with only the other half going to the children. The stepmother is then free to pass whatever she inherits to whoever she likes. And if she dies without making a will, only her own children will benefit under the intestacy rules, unless she formally adopted her step-children.
Most people won’t take the chance of leaving it to the intestacy rules after they remarry. In all likelihood the husband will see a solicitor and make a new will. But this is when things can become a little awkward. The surviving husband who has remarried will feel torn between honouring the agreement made with his late wife in the mirror wills and making financial provision for his new wife, the step-mother of his children. The upshot is often for new mirror wills to be entered into. As before, the survivor inherits the combined estates and when they pass away, the children inherit.
However, in the context of a blended family, the term ‘children’ now has a much wider meaning. It’s not just the children from the original marriage, but any children the new wife has from a previous relationship, together with any additional children that have come along. So the inheritance may have to be shared among a much larger pool of children than originally envisaged, thereby watering down the inheritance that had been intended for the children of the original marriage.
But there’s also an additional problem to contend with. Once the husband has passed away there is absolutely nothing to stop his second wife, the step-mother of his children, from going back on their agreement to provide for those children. She can choose to disinherit her step-children if she wants to and leave everything to her own offspring, or anyone else for that matter.
In the vast majority of cases the new wife or husband can be relied upon to do the ‘right’ thing, but not always. In fact barely a day goes by when we don’t receive a call from someone who has not received the inheritance their parents had intended for them.
And it’s not just ‘wicked’ step-mothers and step-fathers that we need to be wary of. Vulnerable step-parents can be taken advantage of, especially in old age. The surviving spouse may have every intention of honouring the agreed arrangements, but later in life they may find themselves coming under enormous emotional pressure from other family members, friends or even neighbours, to do something different.
So, should couples trust their spouse and hope for the best? Or confront this potential problem at the outset and risk upsetting their partner? This is what we have termed the Cinderella dilemma.
The good news is that for those who want to protect their children’s inheritance there are steps that can be taken. Naomi Ireson, a specialist inheritance dispute lawyer, explains:
“A ‘life interest’ for instance can be used to balance the immediate needs of your surviving spouse with the desire to ultimately provide for your children in the longer term. This arrangement means that your spouse benefits from income generated by the estate and retains a roof over their head, but when they die the assets will go direct to your children rather than passing under their will. So even if they change their will or it is revoked, your children won’t miss out.”
If you are off to see a pantomime this winter, we hope you enjoy booing the baddie. But do bear in mind that fiction can become a reality.
FOR FURTHER INFORMATION ON THE CINDERELLA DILEMMA AND GUIDANCE ON HOW YOU CAN PROTECT YOUR CHILDREN’S INHERITANCE, CONTACT NAOMI IRESON ON 0808 139 1599 OR BY EMAIL AT: