Legally protecting loved ones’ interests and managing assets are the most important priorities for the majority of people. Unexpected things can happen to anybody, so preparing for the worst is always best approach to have.
If someone dies without a Will, dealing with their estate can be tricky enough in the simplest of circumstances, but what happens if a parent (of an under 18) dies without a Will?
Consider these scenarios:
CASE STUDY ONE:
The facts
1. Alan and Barbara are married.
2. Alan and Barbara have 2 children together.
3. Alan and Barbara own the family home jointly, and their only other major asset is a business worth £2 million which they own 50:50
4. Barbara dies without a Will
Question
Who inherits Barbara’s estate?
a. Alan, outright
b. Alan, and the two children
c. The two children equally
Answer explained
Although Alan and Barbara are married at the time of Barbara’s death, Alan does not receive the whole estate. It is likely that the family home will pass to him as this was owned jointly. However under the Intestacy Rules, Barbara’s share of the business (approx. £1 million) will need to be divided between Alan and the children as follows –
Alan receives the first £250,000
Of the rest, Alan receives half and the children receive the other half between them. The children will receive their inheritance (approx. £187,500 each) at 18.
Again, through a Will Barbara could have ensured that everything passed to Alan to save this complexity and the children inheriting part of the business, or a significant sum of money at 18.
CASE STUDY TWO:
The facts
1. Alan and Barbara are co-habiting.
2. Alan and Barbara have one child between them (Amy, 1) and Barbara has one son (Charlie, now 3) from a previous marriage, who has been brought up by Alan since Charlie was a baby.
3. Alan owns the family home and the majority of the couple’s assets are in his name.
4. Alan dies without a Will.
Question
Who inherits Alan’s estate?
a. Barbara, outright
b. Barbara, and the two children equally
c. The two children equally
d. Amy
Answer explained
In this scenario, Amy would inherit the estate. As Alan died without a Will, the Intestacy Rules would work out who receives the estate. The Intestacy Rules are a rigid set of instructions, which only benefit a person’s spouse, children and other blood relatives.
In this scenario, Alan and Barbara are not married so Barbara does not inherit. Although Alan has acting in a parental capacity for Charlie for the last 3 years, Alan is not Charlie’s biological father so Charlie does not inherit.
Amy as the only biological child inherits the entire estate, and according to the Intestacy Rules, will be entitled to receive it at age 18.
Barbara and Charlie may well have a claim on the estate for financial provision but it means spending time and money on legal advice and agreements. There is also a tricky legal problem here in that Barbara is entitled to administer the estate as Amy’s mother, but she also has a claim against the estate in her own right and on Charlie’s behalf as his mother which creates a legal conflict of interest.
If Alan had made a Will, which did not need to be complicated, he could have provided for everyone he cared about without them now having to seek legal advice to sort everything out.
CASE STUDY THREE:
The facts
1. Janet is a single mother.
2. She has one daughter, Kelly who is 11.
3. Kelly’s father has parental responsibility for her but sees her very little and makes no financial contribution.
4. Janet’s sister Lyla helps support Janet with childcare.
5. Janet does not have a Will
Question
If Janet dies, Kelly will receive her estate, but who has priority for looking after the money until she reaches 18?
1. Kelly’s father
2. Lyla
3. No-one, it stays at Court until Kelly reaches 18
Answer explained
Janet’s estate will pass to her daughter under the Intestacy Rules, but Kelly cannot receive it until she reaches 18. As Kelly’s father has parental responsibility for her, then legally he has priority to act as Trustee of the money until she reaches 18. This is unlikely to be what Janet would want! Whilst a Will cannot change who has parental responsibility for Kelly, Janet could have appointed Trustees of her choosing to look after the money and control what is released for Kelly’s care.
How can you avoid these situations?
Else have some top tips to ensure your wishes and family are taken care of if the worst happens.
1. Make a Will and appoint Executors
This is a scenario no parent wants to think about, but preparing for it could save your family a great deal of time, expense and even conflict as they adjust to a new world without you. Planning ahead and preparing a Will ensures that your wishes (for your children and your estate) will be known and, assuming you have fulfilled your legal obligations, your wishes will be adhered to.
Appointing an Executor for your Will means there is a designated main point of contact for managing your affairs as you requested. They have significant duties and should therefore be people whom you believe will able to cope with the responsibility and are well organised. Executors have very wide statutory powers to enable them to collect, manage and distribute the assets and discharge liabilities, and these powers can be extended or amended by the Will.
By making a Will you can also ensure that your children receive their inheritances when you want them to have them, rather than at 18 under the Intestacy Rules.
Having a Will in place can also make sure that if you are not married, your partner is provided for and protected, and if you are married that your spouse receives the entire estate, preventing any sub-division of assets.
2. Executors/Trustees
If your Will leaves any gifts on trust, which includes gifts to children who have not yet reached the age you specified, then your Executors will automatically also be the Trustees of those funds, unless you appoint different individuals. As Trustees of your estate, they will be responsible for managing those funds after the estate has been completed, until the trust comes to an end, or other Trustees are appointed in their place. Executors are entitled to have their proper expenses paid from the estate and can instruct solicitors or other professionals to help advise them and deal with the administration if appropriate. The costs of these professionals would be taken from the estate funds.
This is particularly important for single parents. If anything happens to a single parent whilst their child is still under 18 then it is likely the other parent (providing they have parental responsibility) will take over the day to day care of the child. However if you do not want them to also be in charge of looking after your child’s money as Trustee, then by using a Will you can put the people you want in that place.
3. Guardianship Clause
As the parents of young children, the appointment of Guardians in your Will is vitally important and should be given careful consideration. Often, the first response is to nominate the closest relative, but they may not always be the most suitable person.
A Guardian is a legal status under which a person has Parental Responsibility for a child or children following the death of both parents. This status will continue until the child reaches 18 and in essence means that the Guardian will be responsible for providing a home and supervising the upbringing and health of the child. You can also choose alternative Guardians to act if your first choice is unable or unwilling to, however once an appointment has been accepted, only the Guardian can then choose their successor.
When considering who you might appoint as Guardians, the following factors should be taken into account:
- Proximity of family relationship
- Age
- Existing knowledge of, and relationship with, the child
- Religious/cultural background
- Geography – that is, location of the proposed Guardian
- Suitability of residence and way of life
- Avoidance of disruption to the child’s education and social life
4. Disaster Clause
A disaster clause outlines what is to happen if all your intended beneficiaries die before you or at the same time. You might think this extremely unlikely, and in truth it is a rare event, but all the same it is worth including a disaster clause especially for couples who have children who are still under 18 or living at home, or where they are likely to travel together as a group.
Couples with children generally want each other to benefit first, and then if they both die at the same time the estate to pass down to the children. But what happens in a disaster scenario where there is an accident in which the whole immediate family are taken together? An awful thing to contemplate, but not out of the realms of possibility for example if they are all in the same car that is involved in a road traffic accident.
If the Will makes no provision, then the intestacy rules will apply to any part of the residue of the estate where there are no surviving beneficiaries. Given that in the scenario we are talking about there will be no spouse or children surviving, first port of call will be parents (after that other blood relatives, who may be quite distant).
If there is no disaster clause then these relatives might end up with everything through the rules of intestacy. You may wish to define an ordered list of preferred beneficiaries outlined in your Will if a disaster occurs.
The Else Probate and Contentious Probate specialists have come across a number of complex cases where if the deceased had made a Will, dealing with the estate would have been made much simpler and saved the remaining family members from having to resolve issues at an already difficult time.
To discuss how we can help you make a Will that meets your particular requirements, please contact Kathryn Caple on 01283 526230 or email kathryn.caple@elselaw.co.uk.