What is Sideways Disinheritance and Should I be Worried?
Sideways disinheritance is a term used to explain what can happen when one side of a family is removed from a potential inheritance, whether intentionally or unintentionally. This can happen when a person dies leaving their estate to their spouse, but their spouse then remarries or changes the terms of their Will to benefit a new partner. This means the inheritance they had received from their deceased spouse passes onto their new partner and not to their deceased spouse’s children (so the inheritance moves sideways into a new family rather than down the generational line).
A good example of this is where a parent with children from a previous relationship, marries a new partner. If they then make a standard Wills leaving their estate to their new partner on death, this can leave their children from their previous relationship exposed to sideways disinheritance. Even if the parent and their new spouse make mirror Wills leaving their estate to each other and then onto ALL of their children equally (so children from previous relationships are included) this will not ensure that those children will ultimately inherit. It is not uncommon for second spouses to change their Wills so that their estate (which will now also include the assets they inherited from their deceased spouse) passes only to their own family, excluding the children their deceased spouse had in any previous relationships. A person is free to change their Will any time during their lifetime (providing they have the necessary capacity and they are not bound by the terms of a mutual Will) so the spouse can change their Will, however and whenever they wish. Unfortunately, family relationships often breakdown and even for step families that generally get along well, things can change.
Imagine a chap called Bob. He marries a lady called Beth and they have two children, Bella and Toby. Unfortunately, Beth dies whilst their children are still small. A few years later, Bob meets Alice and they decide to get married. Alice also has two children from a previous relationship, Thomas and Henry, and they all move in with Bob and his children. After their wedding, Alice and Bob make Wills leaving their estates to each other on first death and then onto their four children equally after they have both passed away. Alice and Bob enjoy a happy marriage and maintain close relationships with all their children. Unfortunately, Bob dies unexpectedly several years later and Alice inherits Bob’s estate under the Will he made after they were married, this includes the house Bob purchased with his first wife before he and Alice met. As time goes on Alice sees her (now grown up) stepchildren less and less and Thomas and Henry persuade their Mum to update her Will. Alice decides that her children should benefit from her estate and does not include Bella and Toby in her new Will. On Alice’s death, her estate (which includes the house which originally belonged to Bob and his first wife) passes to Thomas and Henry and Bob’s children never inherit any share of their Mum and Dad’s house. Sideways disinheritance could also have happened in this situation if Alice had gone on to remarry again and leave her estate to her new spouse.
One of the most effective and simplest ways to avoid sideways disinheritance is to add a trust into your Will. A trust allows you to provide your surviving spouse with a life interest (so that they are able to benefit and enjoy the assets during their lifetime as if they were the outright owner) but also ensure that the assets will pass on to your chosen beneficiaries after your spouse’s death. In Bob’s case, if he had included a life interest trust in his Will for his house, Bob could have made provision for Alice to be able to remain living in the house during her lifetime and then direct who should benefit from the property proceeds after her death. Ensuring that his children, Bella and Toby, would end up with a share of his inheritance.
Sideways disinheritance can also happen unintentionally. Assets will pass automatically to a surviving spouse when a person dies intestate (without a Will) and an intestacy will not take into account any previous relationships. A Will is also revoked automatically when someone marries. So, if a widow remarries, any previous Will will no longer be valid. This means that any provision made for previous stepchildren will not take effect. It can also mean that the widow’s biological children can be cut out of any future inheritance, as their estate could automatically pass to their new spouse on their death. Entering into a civil partnership will also have the same effect.
Including an Asset Protection Trust in your Will can also protect your inheritance from other dangers, as well as sideways disinheritance. If assets don’t pass outright to a surviving spouse but instead are ‘ring fenced’ in a trust (where they can still benefit from them but they won’t be the legal owner) then these assets will be protected from any potential future creditors that your spouse might face. This could include any future divorce or bankruptcy orders. It will also mean that the assets in trust won’t be included in the any means tested or care assessments that your surviving spouse may require in the future.
As always, if you are considering including a trust in your Will it is important that you obtain the correct advice and that your Wills are properly drafted.
If you would like to talk to someone about your specific circumstances and how Asset Protection Trusts could protect your estate from sideways disinheritance or future creditors, please do not hesitate to contact us and we will be happy to advise.