Keeping an inheritance in the family
About this series of articles
This article is part of a series that combines explanations of legislation on wills and trusts with practical considerations to help you write your own. You may be interested to read our other articles on wills once you have finished this one.
Keeping it in the family
Usually the reason for writing a will is to ensure that your money and assets are passed on to the people that you want to benefit - usually relatives by blood and their families.
The law relating to wills was enacted a long time ago, and doesn't take into account modern family situations. While it is relatively easy to make sure wealth is kept in the family, you should be aware of certain things.
You lose control of how an inheritance is passed on as soon as the gift is made
You can only give to one 'person'. By this, we mean that while you can write your intention that you give a painting to a son with the intention that he passes it on to his eldest son to pass on down the line of the first child, there is no way to enforce this wish (except by placing the asset in trust, in which case the painting is never owned by son). Your son may give it to his son, but he might sell it, or give it to a girlfriend he later stops dating. So it is important to consider what others might do with your gift.
Gifts to older people may help less than gifts to younger people
Most of our friends (and siblings) are of similar age to us. Often we would like to benefit old friends through our will. However, you should consider the financial needs of your friends, particularly if you yourself are in advanced years. How will their quality of life be improved if you give to them? Do they already have cash assets they are simply accumulating?
Of course, consider too, that whatever you give may increase the value of their own estate on which inheritance tax may ultimately be payable. Ask yourself whether you would not prefer to skip a generation and give to younger people.
Gift of the matrimonial home
We do advise that you try to keep your spouse secure in his or her home, free of any mortgage or charge. If your spouse is dependent on you, then they will have a legal case to claim some of your estate if you do not leave it to them.
If you are joint tenants with your spouse, your share of the house will automatically pass to them, regardless of what your will states. The common way to avoid this is to change how you own your property and become tenants in common so that your share of the property is recognised as separate to that of your spouse (i.e. you each own distinct shares rather than jointly owning the whole). You could then gift your share to your children or into trust.
Usually, gifts to husbands, wives and civil partners are free from inheritance tax, so it may seem attractive to gift the house to a spouse to reduce any tax bill. However, you may inadvertently increase the value of your spouse's estate such that more tax is payable on your share of the house when he or she dies, than if you hadn't gifted it to him or her.
It often happens that when a share in (or all of) "mum’s or dad’s house" comes into the hands of younger family members, it gets charged against personal or business debt and subsequently sold by a creditor. You need to be very sure of your children’s intentions and financial stability before leaving some or all of your home to them and not to your spouse.
For obvious reasons, this is even more important if you have a second spouse or life partner who is not the parent of your children. But fear not, there are ways in which this situation can be "managed", which we explain in connection with specific wills.
Keep your will out of court
If you foresee a situation where someone may be sufficiently disappointed to instruct their solicitor to claim under the Inheritance (Provision for Family and Dependants) Act 1975, it helps if you have explained in a side letter, placed with your will, why you have given that person little or nothing. If your reasons are sound, your wishes are more likely to prevail. Better still - take into account what entitlements certain people may have, at the time you make your will.
Are the parents able to influence how a gift to grandchildren is used?
Parents can face significant pressure to release an inheritance to a young person that might subsequently spent on holidays, possessions and experiences for which you might not intend the money to be used.
In your will, you can control to as great a degree as you like how an inheritance is spent by stating precisely in what circumstances the money can be distributed. Examples might be:
- on a 'milestone' birthday
- for purchase of a house or flat
- to be able to enjoy a 'once in a lifetime experience' such as a gap year expedition abroad
- to pay university or higher education fees and expenses
- on an achievement, such as graduation
Use one or more discretionary trusts
We also have an article on property protection trusts.
We recommend that you read about life interests next, as these are one way of making sure that someone can use an asset (such as your house) without actually inheriting it.
You also may be interested in making your own will using one of the Net Lawman templates. We offer nine in total that together cover thousands of possible variations of wishes. There will be one to suit your situation. If you are in doubt as to which to choose, we have an article on where to start, which will help you to decide exactly which one suits you best.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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