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Second Marriage Syndrome – Wills and IHT

Second Marriage Syndrome is basically when the surviving spouse remarries. This guide will look at the implications this can have on your estate, especially for your children. We will also provide tips on how to prevent this from happening.

A married couple can have mirror Wills and usually they give everything to each other in the first instance. On second death their estates pass to their children. However, this does NOT mean that your children will definitely inherit on second death, see example below:

  • David and Sally have mirror wills leaving everything to each other in the first instance. On second death everything then passes to their son Joe. They own a house worth £200,000 as joint tenants and have a joint savings account with £50,000. David also has £50,000 in an ISA in his sole name.
  • On David’s death Sally would inherit all the jointly owned assets, as they pass by survivorship. So that is the property and the £50,000 in the joint savings account. Sally would also inherit the £50,000 in David’s sole account as his Will leaves everything to her.
  • A few years after David’s death Sally meets John and remarries. As a result, Sally’s Will is revoked. Many people are not aware of this but marriage revokes a Will! Unless, of course, your Will specifically states that it is being made in contemplation of marriage.
  • If Sally then subsequently died before making a new Will the Rules of Intestacy would apply. Her new husband would inherit her estate and Joe would receive nothing.
  • There is also nothing stopping Sally from changing her will and leaving John out.

 

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So how do you do prevent this from happening?

 

  • By severing the joint tenancy on your property and holding it as Tenants in Common instead.
  • This essentially means that you would each own a share of the property. Usually 50/50 but the split can be different, if say, one party contributed more to the purchase price of the property than the other.
  • In your Will, you can include the Life Interest Trust clause which allows your husband/wife to live in the property for his/her lifetime. On your death, your share of the property will pass into the Life Interest Trust. Your husband/wife can continue living in the property but he/she will not own your share. On the death of your husband/wife your respective share will ultimately pass to your children.
  • This is also a very good way of protecting your share of the property for your children, where both spouses have children from previous relationships.
  • It is also good for Inheritance Tax Planning.
  • See the examples below.
Example one:
  • David and Sally decide to sever the joint tenancy on their property. In their Wills, they give each other a “life interest” in their respective half share.
  • On David’s death his half share passes into a Life Interest Trust.
  • The Life Interest Trust gives Sally the right to occupy the property but she does not own David’s share.
  • On Sally’s death David’s half share will pass to Joe, even if Sally remarries or changes her Will.
  • This is known as a Property Protection Trust or Life Interest Trust. Provisions can be added to the clause to allow the surviving spouse to downsize or move, if required.
  • Can also protect your share of the house from care fees
Example two:
  • Martin and Sue have recently married. They have three children between them from previous relationships. Martin has two daughters and Sue has a son. There are no children of the marriage.
  • They own a property worth £600,000 as joint tenants and apart from that it is just their day to day money.
  • Martin has been diagnosed with a terminal illness and wants to get his affairs in order. He is aware that the property will pass to Sue by survivorship, on his death. Sue is in her mid-40’s and will probably meet someone new. Martin is concerned that if Sue remarries the property could end up passing to her new spouse. He does not want his children to lose out on their Inheritance. So what can he do protect the property for his children?
  • They can sever the joint tenancy on the property and hold it as Tenants in Common.
  • Martin can then make a Will giving Sue a life interest in the property, so Sue can live in the house for her lifetime. On Sue’s death Martin’s share of the property will pass to his children. Sue can do the same too to protect her half of the property for her son.

 

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