Second Marriages

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    Estate planning should be considered by all married couples but there are particular considerations that should be applied for a couple where one or both parties have been married previously.

    The additional considerations should take into account the moral and legal obligations that exist outside the immediate family unit. These can have an impact on any opportunities for Inheritance Tax planning that the couple may have both during their lifetime and on death. For the majority of married couples the transferable nil rate band has alleviated the necessity for ensuring each party to the marriage uses there nil rate band on first death with the main priority being making sure the entire nil rate band is available to transfer to the surviving spouses estate. This works well in first marriages where both parties ultimately want the same beneficiaries to inherit (such as their children) but is less practical where the couple wish their estate to ultimately pass to different people. For example, if they have children from previous marriages transferring all assets to the survivor on first death risks the estate only benefiting the survivors family at the detriment of the family of the first to die.

    Making gifts in each Will to different beneficiaries may be equally impractical as this may not leave enough assets to support the survivor; especially where the main asset is the family home. There are two methods of avoiding this problem. The first is to create a discretionary trust of the NRB combined with debt or charge provisions. The trustees can be directed to ensure the children of the first to die receive the sum on the death of the survivor.

    The second option is to create an immediate post-death interest in the assets in favour of the survivor which provides a life interest to the survivor but ensuring the assets pass to the children of the first to die on the survivors death. Different considerations arise where one of the couple was previously widowed.

    This party may already have a 100% uplift on his or her nil rate band from the earlier spouse. In these circumstances it would not be sensible tax planning for this party to leave their estate to there new spouse as the previous NRB will effectively be wasted. Similarly, the spouse without the uplift should make use of their nil rate band if they were to die first as the survivor will already have the maximum 100% uplift.

    In these circumstances a discretionary trust can be vital to ensure all tax allowances are fully utilised. Equalisation of estates through lifetime planning is often considered by married couples but is more of a problem for couples in a second marriage, as it is for unmarried couples, as there can be a reluctance for either party to make substantial gifts to the other. This is not because the relationship has any less permanence but can be contradictory to the long term aim of providing for beneficiaries who are outside the immediate family unit. The mixing of estates may disinherit the clients’ chosen ultimate beneficiaries.

    Although tax planning options may be available care should be taken in ensuring that the clients goals remain the paramount consideration.

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    Matt Walkden Will Writer

    About Matt Walkden

    I am a Professional Will Writer and I offer a small number of other products that complement my Will Writing such as Lasting Power of Attorneys (LPA’s), Fixed Price Estate Administration, often called Probate and some Property Products such as changing a family home from Joint owners to Tenants in Common.

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