How can we fairly divide inheritance between stepchildren and surviving spouse?

[TheReplacement]

Recently married couple have one child each from our respective first marriages (now in 20s / 30s with own houses) but no children together. We are fairly balanced in terms of equal salary and equal assets brought into the marriage.

We own a house worth £300k as tenants in common with a mortgage of £100k.

Currently have life insurance for £250k so that when first one dies the survivor has £100k to pay off the mortgage and £150k to pay their step child for their share of the house.

However that means that when the second parent dies, their child inherits a house worth £300k, so doubly disadvantaged - loosing their parent first and then only getting half as much as step-sibling.

Without going into the realms of taking out multiple expensive life insurance policies, how on earth do we make it fair - any suggestions please?

TIA

Can’t there be a clause in the will that says the child of second parent gets 75% of the house value, and the other 25% goes to the other child? I haven’t actually done the maths, I just mean in principle.

You dont give them £150k when one of you dies.

Just split the house once your both dead?

Then whatever the last person has when they die then gets split equally between the 'children'

Why would you give the £150k life insurance to the child of the deceased when the other half of the couple are still alive and potentially has many years to live with care home fees etc

Surely, you each leave your personal effects and assets to your individual children when you die as it’s a relatively recent marriage.

House goes to surviving partner and then upon partner’s death is divided equally between both children. If house is sold before second partner’s death, half equity goes to first partner’s child.

Could you have wills drawn up where the house is left in trust to both children, and after the first parent dies the remaining parent is able to live in it until their death? This means neither child will benefit until both parents have died. Seems the fairest way. I don’t know whether you’d need to change to joint tenants on the mortgage if you were going to do this.

Both kids get 50k when parent dies then house sold and split when remaining parent dies

in the event of there being no mortgage 50k to spouse and 100k to kids and house split when other spouse dies

the only other spanner in the works is if the remaining spouse goes into care and house is sold to fund that

or which ever one dies there kid inherits there share of house and remaining spouse has lifetime interest life insurance split 3 ways

Thank you for your thoughts, I suppose we wanted the bereaved child to get their hands on their money as soon as their parent died rather than potentially having to wait 30 odd years, which seems unfair.

Yes you each leave your money to your own children.

We have done what @Tashfacehas suggested. We are in a very similar situation to you with similar ish salaries, house worth similar with similar mortgage and one child each, young adults.

As others have said, one of the children will end up with more, in your scenario. Either step child loses out as bio child of surviving parent inherits whole house, or first child gets £150k but then house is sold for care fees and other child gets nothing.

Without sounding whatever it might be described as (I can’t think of the word) it’s not the children’s money.

Just get a will written that treats everyone equally and fairly. Surely your solicitor can advise you?

My FIL had a trust set up. Him and his wife shared the house and had mirror wills. He died first. His savings were distributed to his beneficiaries immediately but the house remains in trust. His wife has a life time interest in the house so can live there forever, if she wishes. However, if she goes into care or wants to move, the house is sold and the trust then receive their half of the proceeds. The beneficiaries then receive that part of their inheritance.

When his wife dies, her children will receive whatever she has left.

Is there a huge age gap between you and your spouse OP? I mean surely when parent A dies, parent B might want to continue living in the house? My mum died in 2018 and my dad moved to a hospice 3 days before his death in 2023. I didn't even think about having the house until his death. Like I don't see why you think this is unfair? The house would not normally be up for grabs until the 2nd parent died. At this point, the money would be split and the will could state that each child would get the percentage corresponding to the amount their parent had put into the house if you wanted.

Is there a massive age gap between you and your partner and your kids and you partner's? I mean that's the only reason I could see a problem:

• spouse 1 mid 60s with mid 30s kids
• spouse 2 mid 40s with young teens
• spouse 1 dies mid 80s with mid 50s kids (20 years from now)
• spouse 2 dies mid 80s with young 50s kids (40 years from now)
• at the time of spouse 2's death their kids are young 50s maybe paying off a mortgage or putting their own kids through uni, BUT
• spouse 1s kids are in their 70s possibly dead, or having done all the really expensive things spouse 2's kids can use the money for years before, and the house money is not of much use to them or gets eaten up in nursing home fees.

Our wills state that the surviving partner has a life interest in the house (mortgage has been paid) and on their death the value of the house is split 75% between partner A's children, and 25% to partner B's children, as partner A has put more value into the home from family inheritance etc. Partner A's family would not have wanted what they passed down to go out of the family. Partner A and Partner B both had adult children when they got married, so none of the children were brought up as children by the family of the opposite partner.

We are in similar situation ( 2 adult children each). Although have been together nearly 20 years . We have mirror wills that leaves everything to each other & then all assets to be split 4 ways when we are both gone . We trust each other not to renage on this (as surviving spouse) .
We've told our children so that there are no surprises

Fine until one of you remarries. I think an actual Legal Trust, is better than trust if you see what I mean.

Remember that wills can be changed. If you want your children to inherit, write it in your will. Don't trust your partner not to change their will .... you’ve got no idea if they'll meet someone else.

No step-kids in my situation, but the house is left to our son in DH's will, with a life interest to me.

You can't. It's too complicated. Both children need to wait till both occupants of the house die before it can be sold. If there is to be money up front it needs to be given to both children.

As well as what everyone else has said, you seem to have failed to considered that the house will likely increase in value along the way, so your life insurance will not cover the amount of inheritance/% of valuation of the house that you wish to give.

if you initially leave it to surviving partner then they can change it any time they like. You cannot stipulate what the surviving partner then does with it. sometimes they have an unfortunate medical issue when their brain becomes detached from their head a slips downwards where is gets lodged somewhere else on the way down.

Without sounding whatever it might be described as (I can’t think of the word) it’s not the children’s money.
if you've worked your ass off for many years in order to have something to leave to your child, then it IS their money. better that than it happily arriving in some strangers pocket surely?

You need Life Insurance for £400k.

Child of first person to die gets £300k (or rather the value of house when parent died) and the remainder £100k pays off the mortgage.

Child of second person to die gets the house which is worth £300k.

Total inheritance is £300k + £150k =450 K / 2 £225k each so first child £150k plus £75k on death of second parent ASSUMING house remains at £300k. Personally I’d give both £75k each death of first partner and divide the rest death of second partner as anything could happen in the meantime including care costs/ market crash/boom.

I would leave your share of the house to your child with the right for your partner to live in it until they die, move someone else in or go into care. The insurance policy can be split £100k to pay off the mortgage and £150k to your child immediately. The surviving spouse is responsible for their own estate planning and care fees.

Remember that wills can be changed, so there is a good chance that any scenario which relies on you having mirror wills could result in one of the children getting nothing if the surviving spouse changes their will.

We have a trust. Basically it means the dead person’s assets go into the trust on their death (for fairness, our assets are already split equally so we have similar amounts in ISAs etc). When the survivor dies their assets also go into the trust and everything gets split between the SCs equally.

The survivor can have money from the trust to live on until their death (if needed) but only on the say so of the trustees. This is to stop one of us potentially draining the trust.

ETA: We spoke to numerous solicitors and there is no failsafe scenario. It is based largely on trust, but it’s the ‘tightest’ way of doing it.

Can you pay to have the house deeds changed so you are tenants in common then who ever passes the will say their share goes to their respective children and remaining spouse can stay in the property then once both have passed the remaining children inherited the other 50% of the property and the remaining estate is then divided between the 4 children that way it is fair for all?

forgot to add or look at putting property in a trust for all children?