Good morning, me again!
I am coming to the conclusion that the only way to achieve an equal balance between four children, two from each side of the marriage is to use a discretionary trust. That specifying fixed shares in a Will could go very wrong.
Clients want to give each other an IPDI for the survivor in whole estate of first to die.
Remainderman interest should then pass to a DT I believe where all four children and their issue are listed as discretionary objects.
Survivor’s estate should also be left to a DT though the DT is particularly important on first death.
Should survivor change his/her Will to benefit only his/her children, the DT from first death can then equalise the inheritance as far as is possible.
Should the survivor need care and use most of his/her assets again distributions from the DT on first death can be made in such a way to equalise the position between the kids.
Does anyone else draft this way? What do you generally do when you have no joint children?
Many thanks
Deborah
Hi Deborah,
Summary of the problem:
Husband has two children.
Wife has two children.
The OP is concerned that leaving the assets to the children in equal shares on the first to die’s death could cause a problem as the survivor can change their will, thus leading to the children receiving unequal shares of the combined estate.
The OP proposes leaving assets on a life interest trust to the survivor and then the remainder interest passing to a discretionary trust with the children and their issue as discretionary objects.
Second to die will also leave assets to the discretionary trust
The OP considers there are two benefits:
• If the survivor changes there will to only benefit their children, then discretionary trust can be used to balance the children’s interests.
• If the survivor spends all of their assets, then the discretionary trust can be used to balance the children’s interests (I do not understand the OP’s point here. An explanation would help)
My answer:
There seem to be several alternatives:
Mutual wills – paragraph 10 of the WIQS Protocol lists the downsides of mutual wills. However, it notes they can be useful, such as in the case of modest estates.
A life interest for the survivor with the remainder interest passing to the children equally – this has the downside that you mentioned, the surviving spouse can change their will and the first spouse to die will have given the remainder interest in his estate to all four children equally.
A life interest for the survivor with the remainder interest passing to a discretionary trust –
Option 2 is the most common where the testator wants to leave everything to his children only on the second death. Your situation is not as common, so I do not know what is the most common solution. Your suggestion has the benefit of, arguably, achieving the greatest degree of certainty regarding the children all receiving an equal share of both estates. However, even achieving that, is subject to the discretion of the trustee. Your arrangement has the normal downsides of a discretionary trust, which would include loss of the RNRB. See this article for summary of the downsides:
Yours the ever faithful Legal Beagle
Thank you John for your response,
The estate would remain in the Discretionary Trust for only a very short time whilst the shares between the four children are calculated. So well within a two year period following the survivor’s death the property and indeed all of the estate will be appointed out to the children thus the executors will be able to claim the RNRB and transfer the RNRB from first spouse also.