Does your Will allow for a beneficiary’s change of circumstances?

Beneficiary's change of circumstances - making a will
In this article we look at two important aspects of managing your Will: keeping it up to date and ensuring it allows for the possibility that a beneficiary’s circumstances may have changed at the point of your death.

Keeping your Will up to date

Lawyers typically recommend that a Will is revisited at least every three years. Wills should take into account changes to the family structure, assets and matters such as marriage (which revokes a Will unless it was made ‘in contemplation’[1]), divorce (which does not revoke a Will but can often leave the testator intestate or partially intestate), separation, new family members, deaths in the family, cohabitees and changes in the law.

Failure to update a Will may lead to the Will being contested – for example due to an Inheritance Act claim. In Ubbi v Ubbi,[2] the Deceased father’s failure to update his will to account for his second family led to the necessity for a claim by his illegitimate children. In Thompson[3], the partner was excluded from the Deceased’s will for a number of reasons, none of which applied at the time of death. Similarly in Nahajec[4], the adult children were not financially stable at the time of the Deceased’s death which his letter of wishes presumed. In the Estate of Norma Hall, the late Mrs Hall’s failure to update her Will to provide for her cohabitee led to the grant of a life interest to him at the expense of her daughter and granddaughter. The family felt strongly that this is not what she would have wanted.[5]

In each case, had the Will been updated, litigation may have been avoided.

Future-proofing your Will for change

Clients often want to leave their property equally between their children, not realising that this in itself can lead to arguments. Beneficiaries’ needs and circumstances may have changed at time of the client’s death. For this reason, even an equal split could lead to an Inheritance Act claim.

Another circumstantial change that can lead to dispute is where, after the first death, the survivor gets remarried, placing the new partner first in line to inherit above the Deceased’s children. If the survivor dies first, the new partner may inherit the whole estate excluding the children entirely.

Rather than make a straightforward Mirror Will, there are alternatives to manage the possibility of change. These include the use of life interests in favour of the spouse (protecting part of the estate from remarriage) and settling part of the estate on discretionary trusts with wide powers of appointment for the benefit of children or grandchildren. The latter allows distribution according to prevailing need.

There are tax implications which need careful consideration in the context of the client’s circumstances. For example, the Residence Nil Rate Band (RNRB) is not available where assets are placed in a discretionary trust. However, your trustees can decide at the time of your death (or within 2 years) whether it would be more beneficial to appoint capital under s.144 IHTA 1984 to take advantage of the RNRB or whether the assets would be safer staying in the trust. An example would be if the adult beneficiary was going through a divorce or owed substantial sums to creditors – in this circumstance, the protection of the trust may far outweigh any saving on inheritance tax.

Always make a Will with an experienced lawyer so that full consideration can be made of your tax and personal circumstances. We offer a free information pack and free one-hour appointment, without obligation.

[1] Wills Act 1837 s 18.

[2] Ubbi v Ubbi [2018] EWHC 1396 (Ch); [2018] 7 WLUK 677 (Ch D).

[3] Thompson v Ragget & Ors (Rev 1) [2018] EWHC 688 (Ch) (29 March 2018).

[4] Nahajec v Fowle [2017] EW Misc 11 CC

[5] Birmingham County Court – reported in the Telegraph. Harry Brennan, ‘Mum’s toyboy disputed our inheritance and now lives in our home rent-free‘ (The Telegraph, 1 October 2018)

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