Blended families are on the rise in the UK, with as many as 1 in 3 families being classed this way. Marrying a partner who already has children or bringing children of your own into a new relationship can forge new bonds and create a joyful family unit.

But a blended family can cause headaches too. Not least when it comes to estate planning.

Managing your inheritance plans so that your money is divided between children, step-children, spouses, and former partners in the way that you wish won’t always be easy. But thankfully, at Expert Wealth, we’re on hand to help.

Here are four key factors to consider.

1. Put a will in place and then keep it up to date

A will is the simplest way to make your wishes known. 

Without one, your estate will be distributed according to the laws of intestacy, which could spell bad news for your blended family.

Intestacy laws mean that your spouse or civil partner, children, parents, and even nephews and nieces could be in line to receive your money before an unmarried partner or your step-children.

If these rules mean your wishes wouldn’t be carried out, be sure to put a will in place now. Once you have, revisit it regularly. Life milestones and events could alter your priorities and these need to be reflected in your will.

2. Communicate your wishes to avoid disputes

You should use your will to clearly state exactly who gets what, from percentages of your wealth to exact lump sums and an individual property or item.

Once you have decided, be sure to communicate your wishes with all interested parties. Explaining your reasons and your wishes should help to reduce the likelihood of disputes. 

This gives you peace of mind that your wishes will be adhered to while hopefully reducing the stress on those you leave behind, at what will already be a difficult time.

This process can be especially important in blended families.

3. Consider a trust and other legal arrangements 

A trust is a legal document that allows you, as the “settlor”, to place assets aside for someone else, the “beneficiary”, with those assets being controlled by the “trustees”.

Because the asset is deemed to belong to the trust, it is no longer part of your estate and can be released to the beneficiary at a set point in the future, for example, on your death.

This can be a good way to ensure your children receive certain assets, even if your surviving partner remarries. 

You might use a “life interest” trust to allow your spouse to continue living in their home during their lifetime, for example, protecting the family home from bankruptcy or divorce. It would then pass to your children on your spouse’s death. 

Trusts can be complicated and ensuring that they exactly match your wishes is vital. Be sure to speak to us if you think a trust could form an integral part of your estate planning.

4. Remember to plan tax-efficiently

As ever with estate planning, managing your Inheritance Tax (IHT) liability is key.

IHT is payable at 40% on the value of your estate that exceeds the nil-rate band (currently £325,000), although you can pass wealth to your spouse without any IHT liability. That means your spouse will only pay IHT on wealth above a combined threshold of £650,000.

And there’s the residence nil-rate band to consider too. This currently stands at £125,000 and can also pass to your spouse, raising their IHT threshold to £1 million.

Both the nil-rate and the residence nil-rate band are currently frozen and the Treasury’s IHT receipts are rising, so managing your liability will help to ensure your blended family receives of much of your wealth as possible.

Get in touch

With decades of experience, our Chartered Financial Planners have the expertise to help you plan your retirement your way. If you have any questions, please get in touch and speak to us today.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.