For a surprisingly large number of families, it is important that the Wills do not pass the parents' wealth straight into the hands of the next generation. Here are six examples of where having a Will which simply leaves everything to your spouse/partner, and then onto the children when the second of you dies, may be unhelpful, and is best avoided.
If any member of the family would find it difficult or stressful to manage a large amount of money themselves, their inheritance should be held for them.
Your Will can appoint trusted friends or family to hold the funds as trustees, on the basis that money will be drip-fed to the child or grandchild to meet their needs as they arise. So the needs of a grandchild with autism, for example, can be met without their having the responsibility of managing the funds themselves.
A Will is often drafted and then forgotten about for many years. If by the time of your death your spouse/partner is suffering from Alzheimer's or dementia, it may not be helpful for the funds to pass directly to them.
If your Will creates a trust, your chosen trustees can look at the circumstances at the time of your death, and pass funds onto the family members who can benefit from them. You can give clear guidance in a 'letter of wishes', explaining where you would wish the assets of your estate to be passed in the different circumstances which may arise.
Passing funds straight to an entrepreneurial child needs thinking through carefully, if there is a risk of funds being lost to creditors if an enterprise fails.
Again, if your estate passes to your chosen trustees they can look at the situation at the time of your death, and see whether some or all of the funds should be kept back at that stage. The trustees have to make decisions unanimously, so your child could, if you wish, be one of the trustees, to keep them involved in the decisions to be made. Assets held in a 'discretionary trust' do not belong to the trust beneficiaries, and cannot therefore be claimed by creditors in an insolvency.
If the divorce or separation of a child or grandchild is a scenario you can imagine, it may be not be sensible for your estate to pass directly into their hands. If your estate passes straight to the child/grandchild, it will form part of the wealth which is available to be divided up on the divorce. Inherited wealth can be treated differently to assets built up by the couple in the marriage.
However, if those funds are required to meet the needs of either spouse or of the children, it may effectively end up in the hands of your child or grandchild's ex. Again, a Will which gives assets to a discretionary trust can provide some protection.
When funds pass directly under a Will to a member of the family who is entitled to means-tested benefits, they may lose their entitlement to receive them. They may also lose 'passported' support or benefits they have been relying on.
If your Will passes your estate to a discretionary trust, the assets do not belong to the beneficiaries of the trust, and any entitlement to means-tested benefits will not be unnecessarily lost.
The inheritance tax due on your estate will depend upon who the assets pass to. Assets which pass to your spouse or to charity pass free of inheritance tax. Where 10% of your estate passes to charity, a reduced rate of inheritance tax can apply to the rest of your estate. An additional tax free band may be available if you are giving a property you have lived in, or the proceeds of sale of it, to a descendant. Without a crystal ball, we cannot know what inheritance tax rules will be in place of the time of your death, and how your estate should be divided to mitigate the tax due as far as possible.
Having a discretionary trust will allows your trustees to divide your estate in the most tax-efficient way, in light of your family's circumstances, and the tax rules in place, at that time.
Having the right Will set up will allow the next generation to benefit from your estate in the most helpful way, and ensure that their inheritance will not be counter-productive to their needs. Even in the midst of a global pandemic, your Will needs thinking through carefully, to make sure it is right for your family.