Should you change your will when you get divorced? It’s probably the last thing you want to think about during divorce proceedings… but the short answer is yes.
Rewriting your will takes your change of circumstances into account. It’s especially significant if you have children because you’ll want to protect their inheritance.
In this post, we’ll look at how divorce affects your will. Most importantly, you’ll discover how to control the ultimate destination of your assets, particularly the family home.
Let’s start with the effect of divorce on your existing will.
Validity of your current will
When we marry or enter into a civil partnership, many of us make a will. Generally, the spouse is named as a beneficiary, sometimes as a trustee or executor.
What happens to the will when you split up?
If you’re separated, it remains valid. When your spouse is named as a beneficiary, they still inherit, no matter how long you’ve been apart.
Once divorce has been finalised
Once your final order (decree absolute) has been issued, the terms of the will automatically change. Anything left to your spouse is dealt with as though they’d died on the day the divorce was finalised.
Your ex-spouse is no longer a beneficiary, so the inheritance passes to the next in line according to the terms of the will. If no other beneficiaries are named, your estate is dealt with as though you’d died without a will in place (known as dying `intestate’).
What happens under those circumstances?
If you die intestate, the law decides who inherits, and what they inherit.
The intestacy rules are strict. While they place relatives in order of priority, with children at the front of the queue, the law doesn’t always provide for modern family relationships.
There’s always a risk that your estate can be distributed against your wishes. So that’s one reason why you should update your will as soon as possible. It gives you peace of mind that your wishes will be followed, regardless of your divorce.
Here’s the next reason — and it’s particularly important when it comes to the family home.
Sideways disinheritance
If you’ve never heard of sideways disinheritance, here’s a quick explanation:
Sideways disinheritance is when children accidentally lose out on their share of the family estate when one of the parents remarries.
Let’s presume you want your children to inherit the family home. Like most people, when you originally bought the property, you probably owned it as joint tenants. In other words, both of you owned 100% of the property.
After the divorce, if ownership of the property was transferred to your ex-spouse, he or she continues to own 100% of it.
Now, let’s imagine that your ex remarries. They make a new will leaving the estate to their new partner. When your ex dies, the estate moves sideways to the new partner and when they die, to their beneficiaries.
Those beneficiaries may not be your children.
That, in a nutshell, is how sideways disinheritance can inadvertently disinherit your children. It’s becoming increasingly common, and accounts for a huge number of expensive will disputes.
What can you do to avoid it?
Property Protection Trust
The most straightforward way to safeguard your children’s inheritance is to create a Property Protection Trust (PPT) within your will.
Under the terms of a PPT, you simply set up a `tenancy in common’ agreement for the family home. You’re no longer joint tenants, where you both own 100%. Instead, you each own a percentage of the property.
It’s usually 50% each, but this can be any share you agree on. The PPT allows your partner to remain in the property after your death, if you want them to, and it also safeguards your children’s inheritance.
Regardless of whether you remain together or not, it ring-fences your share of the estate because no one else can make a claim to it.
Other benefits of a PPT
The other advantage of a PPT is protecting a share of your home and estate from assessment for future means-tested fees — for example, care home fees.
A share of the property is safely in trust for the children. It can’t be taken into account when it comes to assessment.
That’s not to say that PPTs eliminate fees altogether — and they certainly can’t be used solely with the aim of avoiding them. They do, however, protect a certain percentage of the property value against liability for care home fees.
The same goes for inheritance tax. While a PPT cannot be used as a means of tax avoidance, it can soften the blow by reducing the inheritance tax burden on your children.
Conclusion
If you’re going through a divorce right now, or if you’re already divorced and thinking about remarrying, it’s important to understand how this affects your existing will.
We provide clear, straightforward advice on updating your will. We can also give you advice on setting up a Property Protection Trust. Even if you have no intention of getting divorced, we can help make sure your children’s inheritance is safely protected, no matter what happens.