What action to take to protect my DCs financially in case I died and DH remarried?

[Summergarden]

Sorry for the negative sounding title. I have 3 primary aged DCs and am in reasonably good health.

However, a few threads on here as well as seeing a couple of real life cases have caused me to ponder on how to ensure that money is set aside for my DCs in the event that something happened to me. DH and I have wills set up but when we made them we basically set them up so that if either of us died everything would pass to the other.

I would hope that in time DH would meet someone else to share his life with, but tbh it seems that virtually every single man I know who has been widowed ((or just divorced or separated) meets a new woman and moves in with them super speedily, often marrying them too.

What I would like to do is try to ring-fence some money that on my passing would go directly to my DCs if they had reached adulthood or else be held in an account solely for them that neither DH or anyone else could spend.

As it currently stands I do have fairly sizeable assets in my own name that I could leave them- a small BTL house owned outright and a smallish S&S portfolio.

Of course I’d hope that DH would do the right thing by them, but if say he remarried then died and everything of ours was left to a new wife I would turn in my grave if my DCs were left with nothing after all the sacrifices weve made over many years.

If anyone has any advice on the best way to go about doing this, I would be grateful to hear it. Is it best to move the money into their own names now to be 100% sure that it will be theirs, or to get a new will made to make provision for it further down the line, or is it something a financial advisor would deal with? What exactly do I need to ask for- is there a technical term for what I want to do?

Neither DH or I come from moneyed families so this is unchartered territory for us.

Thank you in advance.

You can leave it in trust for your DCs. But if DH had done this before he died then DD and I would have ended up being homeless. I needed every penny I could get to make the mortgage affordable on one salary. So I'm very glad he trusted me to do what's best for DD. I have now ring-fenced the proportionate value of the house that DH and I had paid off before he died and it will be left to my DD when I die, regardless of what changes between now and then.

I would make an appointment with a solicitor and ask them. I would imagine it's a question asked not infrequently.

It’s best if it goes into trust for them, but you should have a chat with a solicitor and also your DH.

I wouldn’t leave your BTL house as such to your DCs as it will mean they lose their first time buyer status when they come to buy their own properties, plus would be subject to CGT when they sold it. Instead, you could have it worded in your will that you wish that property to be sold and the money held in trust for them.

You don’t need to pass money to them now. You will be looking at either leaving to them in some Trust or leaving things to them but giving DH a period of interest/lifetime interest (so for example the BTL property you could leave to children but say DH can use the money from rental in their minority). You need to have a think about how the children will hold the assets when they are older. Start with a solicitor specialising in wills they will let you know if you need to bring in a financial planner.

I think you are being very sensible. So many men remarry incredibly quickly and if they then divorce (or your DH dies) your children could be left with nothing.

Yes.

Ringfence your money for your kids.

He could remarry and in the worst case scenario her kids benefit.

DH and I had mirror wills and he died leaving me with 3 dependent children. I have inherited everything and the children will receive nothing until I die apart from DH inheritance from his parents which has correctly bypassed me and is in trust for them.

the honest answer is that he has trusted me to do the right thing. By leaving all his money to me I can give them the life they deserve growing up. If I only had half the money then the children would suffer.

should I remarry, and it’s highly unlikely purely because I want to protect my assets, I’ll have a new will drawn up and a pre nup. Whilst not legally binding it is almost always upheld and it will be done properly and with a decent solicitor.

Ring fencing seems very sensible.

I have also observed this with men.

Consult a solicitor, but one possibility is to leave all assets you own except the family home to your DH and kids in the ratio 51:49 (so they get 49% in total).

Agree that you would probably want to liquidate property in those circumstances, so you could stipulate property to be sold.

As PP have said taking the legal/trust route now could have negative consequences. At best it will be expensive in terms of legal fees, at worst it could seriously inconvenience a (hypothetical) future grieving husband and father and prevent him from spending the money on things (house, school fees, university etc) that could benefit your children.

Also, if you want to ring fence money in case you die, presumably you’re willing for him to do the same thing to prevent you getting control of his money if he dies? Presumably he owns part of your shared house? How would you feel about that being signed over to your DC, who might be able to evict you once they turn 18? It would also likely make it extremely difficult to ever remortgage, or sell and move somewhere else. You would have just lost your husband, but this sort of legal complication could cause you to also lose your house, or (almost as bad) be trapped there and unable to ever leave.

Perhaps a better route is just to discuss this together now and make clear what your expectations are of each other in the event one of you dies. You could even put it in writing and both sign. This probably won’t be legally binding, of course, and you will have to trust each other. But hopefully you feel able to do that - you are, after all, married to each other!

I have seen this very thing happen, the children of the first marriage got nothing when their father, who had remarried after the death of his first wife/their mother, later died and his 2nd wife inherited everything, and then her children scooped the lot when their mum died a couple of years later.

Two fairly simple ways to do this, without involving the assets you have listed, or as a backup the the arrangement you make for those assets...

1. Take out substantial term life insurance, nominating your children as the beneficiaries. If you are fairly young and in good health this should be very affordable. Research how much and the most suitable term. Use comparison and cashback sites to find the best deals - non-advised will be cheaper if you do your own research.
2. Pay as much as possible into your defined contribution pension. It's a tax efficient way to pass on an inheritance as its not counted as part of your estate. If you die before age 75, your beneficiaries will not pay tax on it. If after 75, they will only pay income tax on any withdrawals. You can nominate whoever you wish to receive the fund including your children.

https://pensionaccess.co.uk/discovery/pension-basics/can-you-leave-your-pension-to-your-child/

You will need to seek professional legal advice but I’d advise your husband to do the same.

Just get life insurance written in trust for them so there won’t be Inheritance Tax. Ringfencing property shares can cause more problems than it solves.

My dd inherited money in trust from my partner who died unexpectedly when she was young. Honestly it's been very fraught. For starters she stands to inherit a lot of wealth at a younger age than I'm comfortable with, when I feel it's hard to guarantee she'll be sensible. I can't easily use that money during her childhood (I need trustee permission) so although there is money there, we're struggling in the here and now. I am having to move to a new area because once she inherits her portion of our property, I won't be able to afford anything alone.

My dp set up his will with the best of intentions but if he had fully understood the consequences (he died unexpectedly so I don't believe he had a clear idea of the ramifications) I actually think he would have left everything to me. Unless your DH is truly untrustworthy I would think very carefully before going down this route.

Is your house (the one you live in) owned as Tenants in Common or as Joint Tenants? If tenants in common you can leave your share to your children, with a life interest to your DH with whatever conditions you prefer, such as until the children are 21, or until he remarries for example.

You need to discuss it with a solicitor.

But I think you are doing the right thing. I have seen so many men remarry, leave everything to a younger woman who outlives him and who does not then honour his children in her will. And may even then remarry another man… leaving everything she now has to him! 3 of my friends have seen their mother’s family’s inheritance disappear to Wife2.

Thanks so much for the replies! A lot to think about, more than I first anticipated.

Admittedly I haven’t discussed it with DH yet but when I explain it to him I’m pretty sure he will understand where I’m coming from and I’ll be clear that I’m happy for the same thing to happen with his money if it were him to unexpectedly pass first- he has his own investments etc and we have always attempted to keep the value of both of our assets similar.

I’m trying hard not to turn this into a stealth boast but we have found ourselves in a better financial situation than we ever anticipated- paid off mortgage on the home we live in and fairly decent pensions too.

One of our DCs has SEND and May struggle to live independently and earn a good living, so for his sake in particular I’m anxious to ensure he will always be provided for or at least have financial support to help him have a home etc as an adult.

@Summergarden remember you can write a new will when ever you want. What are the right options now with young DC may change when they are 18, 21, 30, 40 etc. Regularly reviewing your will is good practice.

I agree with a pp, assets you own in your own name and can be liquidated. You could choose to leave just to your DC or split % between your DC and DH. Your current home could be held as Tenants in Common and you leave to your DC with a lifetime interest for DH. You can give flexibility to DH to sell & buy another property and the DC retain their ownership. Think long term, DH at 70 might want to downsize to a flat etc.

A STEP solicitor can help you work through the options. Mencap can also advise on options for your DC.

I was worried about this so got mirror wills where our house is in trust for the children, but our money is not.

so whatever happens the children will inherit half a house but the money isn’t included.

it costs a fair whack to set up. Bit worth it IMO

I have my will which sets out what money/property is for my DH and what is for my DC from my previous marriage. It doesn't even have to be a deliberate decision, if we were both in an accident and DH outlived me by minutes without a properly worded will everything would go to his DC from his previous marriage.
See a solicitor

Definitely ringfence!

DMs parents died - left her a LOT of money.
DM died - DF said no will so he inherited the lot.
DF remarried and then died. His wife said there was no will (he’d told us that he had written a will and that he’d specified her to have life interest in house and then his half to come to us) so basically inherited DFs money DMs money and grandparents money. She has no children but has named her cousin as beneficiary. I and my sibling have never inherited a penny and now never will despite our parents being pretty well off.

Awful.

And why people should lodge wills with the Will Safe service, and possibly give close family a copy for safekeeping.

Absolutely!

There is an easy solution and a STEP qualified solicitor is your best bet to put in place. You need a ‘flexible life interest trust’ for your husband. He can be one trustee but you could have a Professional or a friend or relative you trust to carry out your wishes as the other. Your assets and half the house (if held as tenants in common) would pass into the trust. He would have a right to live in the property and to the income from any investments for his lifetime. The capital of the property and other assets would be ringfenced and held for your children after his death. There would be no IHT if you died first as a transfer on death to this type of trust is classed as spouse exempt. On his death the value would be included in his estate but he would be able to claim the transferable nil rate bands. You also need to consider trusts for the children in case you both die while they are young.

@HideTheCroissants did your Dad die in England (and was he English?) because English laws of succession for assets not held jointly would give half to children and half to spouse in that situation, after the first £322k.

Of course the assets could all have been held jointly but that would be unusual (and would have meant they weren’t covered by any will anyway).

See here https://www.gov.uk/inherits-someone-dies-without-will

And obviously that would also have applied on your DM’s death too. Rules have changed on intestacy within the last 15 years or so but once the estate reaches a certain size it has always been shared between spouse and children.