With divorce and remarriage becoming increasingly common, families have started blending together, to become a meld of parents and their new spouses, and children living part time with each parent. It is therefore important to remember that it is never too early for estate planning, and drafting your Will, especially as, in most circumstances, marriage revokes any former Will.
Unless a new Will is made after marriage, the rules of intestacy will apply, which sets out the order in which a person’s estate can be distributed. Currently, a spouse will receive the first £322,000 of a person’s estate, and if there are any children half of the remainder. This is known as a “statutory legacy”. The children would receive the other half of the estate above the £322,000, to be divided equally.
By way of example, if your estate is worth £400,000, the first £322,000 would pass to your spouse, and the remaining £78,000 would be split equally between your spouse and your children. Your spouse would receive £39,000, and your children would each receive an equal share of the remaining £39,000.
Property and your estate
Another thing to bear in mind is that when purchasing a property with someone else, you have the option of purchasing it either as Joint Tenants, or Tenants in Common. Joint Tenants means that the property passes directly to your co-owner outside of any Will or the rules of intestacy, and does not form part of your estate. The effect of this, is that the value of the property is not taken into consideration when calculating your estate’s value, including the statutory legacy. Alternatively, if held as Tenants in Common, your share in the property would pass under your Will or the rules of intestacy.
An example of divorce, remarriage and property
A recent case of John v Shaw is a sad story of Emily’s two children, Sam and Jake, Emily’s new husband, Jonathan, and her ex-husband and the childrens’ father, Michael. Emily unfortunately died suddenly aged 33, without a Will. She owned a property as Joint Tenants with Jonathan with an estimated sale price of a little over £500,000. Emily also had other assets with a value of approximately £50,000. As the property passed direct to Jonathan, and the rest of Emily’s estate was not more than the statutory legacy (of £322,000), her children did not inherit anything from her estate.
Sam and Jake, aged 13 and 11, had been diagnosed with autistic spectrum disorder and so attend a specialist, fee paying school. They live with their father, Michael, in a two-bedroomed property, who could not afford the school fees by himself without going into large amount of debt.
Michael, acting as Sam and Jake’s litigation friend, brought a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the “Act”), on the basis that Emily did not make reasonable provision for them in her estate. This means that Michael sought to make a claim against Emily’s estate so that the children would inherit more than they would have under the intestacy rules. This was on the basis that Emily, when alive, did financially support and provide maintenance to her children.
Could the Court bring property into an estate?
In some circumstances, under the provisions of the Act, the Court can also bring property back into the estate, even if it has passed directly to a co-owner as Joint Tenants. In this case, Michael asked the Court to treat Emily’s share of the jointly owned property with Jonathan as forming part of her estate. If accepted, this would mean the value of Emily’s estate would increase from £50,000, to include her share of the property.
The Court agreed that there had not been reasonable provision made for Sam and Jake, as there had been none. Taking into account their financial and educational needs, the judge awarded £50,000 to enable them to live in a three-bedroomed house (either by Michael building an extension, or by buying a larger property), and a further £100,000 in order to allow the school fees to be met.
Part of the dispute involved issues over how the property came to be in both Emily and Jonathan’s joint names. The Court allowed Jonathan to retain three fifths of the equity in the property, as a way to acknowledge this element.
If you think that you, or your children, have not received reasonable provision in someone’s estate after their death, please contact a member of the team, who will be able to advise you.