From voided wills and disputed legacies to children missing out on their inheritance, passing wealth from one generation to the next can be a minefield for people who are divorced, remarried or have children with different partners (“blended families”). This article looks at how to steer clear of the risks that could jeopardise legacy planning and how to meet the differing and potentially conflicting expectations within your blended family.
An estimated one in three UK families are blended (at least one partner has children from a previous relationship), and the number of blended families and complex dynamics within them has been increased by growing rates of divorce and remarriage among people in their sixties and seventies.
Even if relations between step siblings or children and their parent’s new partner are reasonably harmonious, wealth transfer comes with a host of extra challenges, and if relations are strained, it becomes even trickier. What then are the big risks to look out for?
Mingled assets
Divorce settlements can be notoriously complex. The financial complications – inheritance prominent among them – can be exacerbated if parents go on to remarry. Assets can become mingled and pass to the ex-partner’s new spouse and then on to his or her children. The children from the previous relationship(s) would miss out as a result.
Voided wills
If you are remarried and die without a valid will, your current husband or wife will be the main beneficiary of your property, investments and other assets. Any children from a previous relationship could be inadvertently disinherited as a result, with little chance of contesting this
Crucially, even if you had made a will before you remarried, it will be revoked as soon as you tie the knot. Your children would therefore face the same risk of disinheritance as if you had not made a will in the first place.
Costly disputes
Specialist solicitors estimate that as many as 10,000 people in England and Wales are disputing wills every year. The strained relations within many blended families can heighten the risk of conflict and legal challenge.
In many countries, notably Scotland, dependents can be allotted at least some of the estate even if they are left out of the will. However, there is no equivalent of these ‘reserved rights’ in England and Wales. Legal action can therefore be a hazardous and often costly process for claimants who believe they have been unfairly treated and those they are claiming against.
Hefty tax bills
The IHT rules favour couples over single people. Anything you leave to your husband, wife or civil partner is exempt from IHT. When he or she dies, the threshold for paying IHT is £650,000 rather than the single person £325,000 as the unused nil-rate band will have passed to them. They could also benefit from two times the main residence allowance of £175,000 if the property is passed to children or grandchildren. That all adds up to a sizeable £1 million in IHT free assets.
However, if you divorce, the threshold for paying IHT on your estate reverts to the single person £325,000. This makes it much more likely that your beneficiaries will be caught in the IHT net and left to pay a 40% tax bill on the value of assets above this threshold.
Three ways to take the stress out of blended family legacy planning
So how can you steer through these risks and complexities? Three priorities stand out:
- Sort out your will
The most pressing priority is making a will if you have not done so already. If you are planning to remarry, you can prevent your will from being voided by including an ‘in contemplation of marriage’ clause, which explicitly states your intent to marry and to whom. The other option is to make a new will after the wedding has taken place, though this could leave you without a valid will for a period of time. In addition to saying who gets what, you might also want to incorporate specific instructions to help take care of particular family members and prevent potential disputes. This might be assigning a guardian for younger children. You might also ensure that your new husband or wife has the right to live in your house while they are alive, before passing it on to your children when he or she dies - Settle any issues while you are still there to mediate
Like many people, you may be reluctant to talk about inheritance. Yet getting the conversation underway now would allow you to discuss your plans while you are alive, dispel any potential misunderstandings and agree on who receives what in an equitable way. Crucially, these discussions would also allow you to identify and tackle potential sources of conflict while you are still able to mediate, rather than allowing them to escalate and become a source of legal wrangling after you have gone. - Meet different demands, while eliminating IHT
Passing on your wealth while you are alive would help to make sure that the money goes to your beneficiaries when they need it most – covering a deposit on a flat when they are young, for example, rather than passing on the money when they are in their fifties and sixties and are already well set. The other big advantage of giving while you are living is helping to eliminate IHT. Commonly used options include gifts or trusts. However, these need to have been in place for at least seven years before you die to be IHT free. They can also require a lot of paperwork and legal costs to set up. A faster, more flexible and more straightforward alternative is Family Trading Companies. By investing in assets qualifying for Business Relief such as forestry and property development, your family’s capital can be IHT free in two years. From April 2026, there will be a £1 million cap on full business relief, but funds above that would still qualify for 50% IHT relief. As a bespoke solution, Family Trading Companies allows each beneficiary to be the sole shareholder in a company specifically set up to meet their particular life goals and investment preferences. In this way, you can satisfy all the different needs and expectations of your blended family, without requiring them to agree between themselves.
