A Guide to Estate Planning For Second Marriages

Getting married for a second time can feel like a fresh start. But it’s important to consider how combining your life with someone else’s may impact your future financial planning when it comes to protecting those you love.

It can be difficult to determine what is fair in a second marriage when it comes to estate planning in the UK. This is especially the case when you or your new spouse are bringing children into the marriage. You might even go on to have children together at some point who will need providing for should one of you die. Understanding some of the key financial issues surrounding second marriages can help with managing your inheritance tax planning in the UK so we have put together some of the key information to get you started. Feel free to contact us if any of these issues apply to you or to enquire as to how we can help you with your estate planning needs.

Marriage And Inheritance Tax In The UK

If you marry, it’s very important to know two things:

1. Your previous Will is immediately revoked as soon as you marry, unless it was expressly made with your marriage in mind.
2. Unless there is a valid Will in place which states otherwise, your new spouse will stand to inherit the first £250,000 of your Estate, and half of the remaining Estate, should you die first, even when leaving children surviving you.

These inheritance tax laws apply in England and Wales regardless of whether you are entering your first, second or third marriage, even when there are children from a previous relationship. This is because under the Rules of Intestacy, your spouse is given ‘priority’ over your children and so will be the main Beneficiary.

If you do not have a valid Will in place when you die, your spouse could receive everything, and your children could inherit nothing or very little. Let’s look at this a little more closely…
How Do I Protect My Assets In A Second Marriage?

Subsequent marriages can prompt many considerations for estate planning in the UK. Both spouses should be aware of a number of key issues such as:

• What assets will be left to each of your children?
• Are there additional children that you have together or plan to? And if so, what assets will be protected for them?
• Do you wish to continue to hold assets separately?
• Are there any assets to be put in joint names, eg: a first home, holiday home, rental property or bank account/s?
• Are either of you bringing debt into the marriage? Will you incur new debts after the marriage?
• Do each of you have an existing will in place that needs to be updated?
• Will you create a new joint will?
• What other estate planning measures are necessary in the UK… a trust, lasting powers of attorney or life insurance?

Ideally, you should be having these kinds of discussions before the marriage minimise potential conflict later.

It can also help to complete an inventory of your assets and liabilities so you both know what you’re bringing into the marriage. Here is some further info on Inheritance Tax laws in the UK.

Estate Planning For Second Marriages With Children

Having dependants or even grownup children can add complications to your estate planning when getting remarried in the UK. You may want to leave certain assets to your children while your new spouse may want your assets to be equally distributed among theirs as well. There may be questions over who would assume control over assets on behalf of minors should one of you die.

It’s important to consider any previous plans already made in a will or trust and how that might affect what your spouse stands to inherit. You may need to update your will or set up a separate trust, for example, to ensure that your spouse receives the desired share of your assets while still preserving your children’s inheritance.

The same applies to any children you plan to have if you plan to expand your family.

What Happens If I Die And I Haven’t Made A Will?

If you die without making a Will and leave behind a spouse and children then the laws of intestacy state that any assets in your sole name, up to the value of £270,000, will pass to your spouse. This goes for any assets which you and your spouse own in joint names as joint tenants.

Your spouse will also receive half the remainder of your assets (the remainder over £270,000). The other half passes outright to your children on your death.

Trusts

A trust can also be a useful tool in inheritance tax planning. These enable the passing of your assets to your spouse or children as well as managing estate and inheritance tax planning in the UK. If either of you are bringing sizable assets into a second marriage and you want to minimize the potential for conflicts over their distribution later, setting up one or more trusts could be a good idea. Talking to an estate planning solicitor can help you decide whether a trust is necessary and if so, which type to set up.

Also, consider whether you have sufficient life insurance to provide for the surviving spouse and any children associated with the marriage. Both spouses in a second marriage may need to have life insurance coverage, particularly if one person is the primary wage earner while the other is the primary caregiver for children.

Finally, consider what you may need in terms of end-of-life planning. A power of attorney can ensure that your wishes are carried out in end-of-life situations where you’re unable to make financial or medical care decisions on your own behalf.

The Bottom Line

Deciding what’s fair in a second marriage and estate planning can be controversial but we want to make it as stress free as possible.  Understanding what the biggest challenges in a second marriage are can help you work together to create a plan that both partners can be satisfied with.

Our Top Tips For Estate Planning

• Consider talking to a financial advisor about pre-nuptial agreements. Most people remarrying are fairly realistic about the possibility of the relationship coming to an end and aware of the importance of agreeing mutually satisfactory terms to provide security for any children.
• Trusts can be a useful estate planning tool for couples, including those who are getting married for a second time. They can be helpful for passing assets on to a surviving spouse while minimizing inheritance tax in the UK.
• You may want to create a second living trust set up specifically for your children
• Legal Affairs – Create a new Will as an old Will be void once you marry. Many people want to provide for their new spouse and children from a previous marriage, so it is vital you contact us to ensure that your wishes will be acted upon.