Understanding Financial Security in a Blended Family
Financial anxiety is a common concern for many, especially when it comes to protecting assets and ensuring the well-being of children. For individuals in blended families, these concerns can become even more complex. If you're contemplating marriage with a partner who has children from previous relationships, it's essential to consider how your financial decisions will affect your future and that of your children.
A reader recently reached out with concerns about her financial situation and the potential impact of marriage on her assets and those of her children. She shared that she and her partner are both 50, have two children each, and are considering marriage. While they are financially similar, she worries about what would happen to her assets and the inheritance of her children if something were to happen to her first.
Jessie Hewitson, a seasoned money journalist, provided insights into this dilemma. She explained that mirror wills, which are commonly used by couples with children or stepchildren, may not be sufficient to protect one's interests fully. Mirror wills typically outline the couple’s wishes for their estate after they die, but they don't prevent one partner from changing their will after the other passes away.
The Risks of Mirror Wills
Paul Hutchinson, a legal expert from Hutchinson Legal & Associates, shared a real-life example where a woman nearly disinherited her own children after meeting a younger man following her husband’s death. This scenario highlights the vulnerability of individuals during periods of grief and the importance of having a more robust financial plan in place.
Hutchinson emphasized that mirror wills are often not enough. A person can change their mind, even after one of the spouses has died, particularly if they are vulnerable. To better protect your assets and ensure your children's inheritance, he recommended a life interest trust clause in your will.
Life Interest Trust: A Stronger Protection
A life interest trust allows you to specify how you want to divide your estate. For example, your half of the house and savings could go into a trust for your husband, and when he dies, the trust fund would go to your children. This ensures that your children's inheritance remains protected, regardless of any changes your husband might make to his will.
Under the rules of the trust, your husband can live in the property for as long as you stipulate, and he can benefit from any income generated by your savings while he's alive. If your husband decides to downsize and buy a new home, your share of the proceeds would be paid into the life interest trust, ensuring continued protection for your children.
The Importance of a Will
If you get married without a will, the law dictates that your spouse will automatically keep your personal possessions, assets up to £322,000, and half of whatever is left. The rest is divided equally between any children. However, step-children are not included in this division. This underscores the importance of having a will in place to ensure your intentions are clearly stated.
For added security, you can also consider a prenuptial agreement, which provides an additional layer of evidence of your intentions regarding financial matters.
Final Thoughts
Marriage can bring many benefits, but it's crucial to address financial concerns openly and clearly with your partner. Good communication and clear will arrangements are even more important in complex family situations. By taking proactive steps, you can ensure that your assets and the well-being of your children are protected, no matter what the future holds.