Marrying again? You may need a “silver nuptial agreement”
A new breed of prenuptial agreement is helping couples meeting later in life to avoid the agony of an inheritance dispute.
As the number of disputed wills and inheritance claims reaching the High Court soars, many people are turning to “silver nups” to protect their assets before they remarry.
In 2014, 178 probate disputes were heard in the High Court — an increase of 83 per cent from the year before — and experts are warning of the dangers of failing to make an iron-clad will.
Eli Pressman, of Barnet Wills, the specialist wills firm, says: “Remarriage, especially when the partners are over 60, is the one of the most common ways people get disinherited, with stepchildren most at risk of losing out. There is nothing to stop the surviving step- parent from rewriting their will and leaving the children from the first marriage out completely.”
Jane Gray, the head of the private client department at Stowe Family Law, says the problems come when couples make a “mirror” will, resolving to pass on their estates to one another with the intention that money cascades down to children and stepchildren on the surviving partner’s death.
“Sadly, the death of a parent can trigger the dissolution of ties between a child and their surviving step-parent. This might occur if a child feels a sense of resentment at money passing to a step-parent.
“The law permits complete testamentary freedom, so we are all free to do as we please. Just because we made a mirror will does not mean we are bound by it after the spouse has died.”
Emma Pearmaine, the director of family services at Simpson Millar, the law firm, says staff are seeing an influx of parents going into a second or third marriage who want to draw up “silver nups” to ensure their assets go to their children.
Ms Pearmaine says: “Silver nups are not just for the rich and famous. People are starting to catch on to the fact that these agreements are very valuable. The market for silver nups tends to be older people who have significant assets and are concerned that their children receive an inheritance.
“They’ve been married before and they know what can go wrong — once bitten, twice shy. This age group tends to be pragmatic, rather than romantic, about their finances.”
Prenuptial agreements, while not legally binding, are increasingly taken into consideration by courts when deciding how to split assets and how to distribute someone’s legacy. The divorce of Katrin Radmacher, the German heiress, and her husband, Nicolas Granatino, in 2010 triggered a landmark ruling when three Appeal Court judges agreed that prenuptial agreements should be upheld, so long as certain safeguards were met.
The silver nup, which costs between £350 and £1,000 depending on its complexity, is not a substitute for a will but it can add weight in the event of a legal dispute, says Ms Pearmaine.
“It addresses assets and income in the event of separation or divorce but it also ties up what would happen on death in conjunction with a clear will. It’s a complete package.”
Children who have been disinherited by a step-parent can make a legal bid for a share of their estate under the Inheritance (Provision for Family and Dependants) Act 1975, particularly if they are being financially maintained by the step-parent. However, the cost and distress that comes with legal action means that prevention is the best cure.
Ms Gray says: “The starting point should be to anticipate and prevent claims by making adequate provision, although for some families this is too much to bear and they will still prefer to take the risk of a claim.”
One way to ensure your money goes to the right people when you die is to prepare “mutual wills” with your partner. These limit the ability of your surviving spouse to change their will after your death. Yet they can be too restrictive and don’t allow for changing circumstances, such as the birth of new children after the will has been made.
“Far better would be to have a sensible discussion around drafting a more flexible will to suit all parties’ needs. This does involve bespoke planning but is often worth it for family harmony,” Ms Gray says.
Flexible interest in possession (IIP) trusts may be a good idea for many remarried couples.
Ms Gray says: “This is a legal arrangement whereby someone holds property or cash for the benefit of more than one person over a period of time.
“The trust might give the surviving spouse a right to the income of the trust fund, with a power to have capital transferred to other intended recipients — such as children — contained in a side letter of wishes.”
Those with enough money in the pot, and the foresight to see potential conflict ahead, can go for a simpler, more brutal, option — the “clean-break” will.
Ms Gray says: “This might make set provision in a will for a surviving spouse and children to benefit in certain percentages. In these cases, the children would not have to wait until the death of a step-parent to inherit.
“The problem is working out how much to give to various recipients. One never quite knows how much will be left at the end of the day and most people want to ensure their spouse has enough to live in comfort. It is not an exact science.”
People who remarry also need to remember that any previous will can be automatically revoked. If no new will is made, their estate would come under intestacy rules that also apply to people who die without a will. This means that a surviving spouse receives a priority legacy of £250,000 together with all personal chattels and one half of the remaining estate. Surviving children would only receive the other half of the remaining estate which — in many cases — will amount to nothing.