Blended Families

Protecting the Estates of Blended Families

Protect your family wealth

Generally, relatively few blended families receive adequate advice on the protection and inter-generational tax planning of their estates, be it pensions, Death in Service (DIS) benefits, life cover, property assets, savings and investments or lifetime inter-generational transfers.

Integrated financial planning and effective legal planning are essential in delivering the desired outcomes for blended families. The use of lifetime and deathtime Trust frameworks is a popular, reliable solution but many clients are rarely advised to use them by legal service providers and may be led to believe they are overly complex and expensive to maintain which need not be the case.

Many couples within blended families do not even have Wills and do not fully understand what difficulties can be created at probate, and that their assets may not be directed where they would like them to go under intestacy rules. Their spouse is often excluded from benefiting from the residual estate.

Those that do have Wills, have simple Wills that direct assets “absolutely” to their chosen Beneficiaries which is effective for directing wealth but inefficient in protecting it and extremely tax ineffective when assets are directed to a Beneficiary where spousal exemption rules do not apply.

If your clients are a parents or have family members who they wish to benefit from their wealth, you must consider possible future outcomes that may befall your client’s chosen Beneficiaries and address any concerns that they may have now or that may emerge in the future.

Common concerns many blended families have are:

What is the risk to their wealth following their death?
If they leave their estate to their partner and they require long term care, what will happen?
Loss of tax allowances because their Wills are tax ineffective.
Will their assets ultimately pass to their chosen Beneficiaries after their partner deceases if the partner changes their Will?
What would happen to the inheritance the chosen Beneficiaries receive if they were to divorce?

There may not be IHT payable when the first spouse dies but it means the surviving spouse’s estate is highly likely to pay IHT because of their combined wealth.

If you have an estate that may creep into the realms of IHT when the second of you deceases, a Beneficiary Protection Plan may help to reduce the tax burden for your primary Beneficiaries.

If you look beyond the inheritance to the Beneficiary, you will appreciate the many potential issues that exist and some of them are unique to blended families.