Whether it’s your first, or your twenty-first (!), the birth of a grandchild is a wonderful event.
And as with any major change to your family circumstances, it’s a good time to review your Will or Estate Plan and ensure that what you have previously planned still reflects your wishes.
If you’re unsure as to whether your Estate Plan best protects and provides for your grandchildren, here are the key questions you need to consider:
1. What are their parent’s current circumstances?
If you die intestate or have not recently updated your will, then it’s possible that your estate will be divided equally between your adult children. Perhaps you are happy with this situation, confident that this is what you want and it reflects your wishes (although do note that if you die intestate, it will be harder and more expensive for your heirs to get Probate and they will likely have to wait longer for their inheritance and possibly pay more inheritance tax).
But if you have cherished grandchildren and you wish them to be provided for after you have gone, you may need to consider the circumstances of your adult children. Are they a single parent or cohabiting? Do you think it’s possible they will get married in the future?
Do you understand the implications for your grandchildren if they do get married?
If they do get married, any previous Will they have made will be cancelled and their new spouse becomes their main beneficiary. So anything that you leave to your adult child will be passed to their spouse – not your grandchildren – if anything should happen.
2. What if my adult child divorces or separates after I die? What if they remarry?
Are you confident that your adult children will never divorce? Or that if they were widowed, they would not remarry? If they are currently married to someone who is not the biological parent to their children, your bequest could be swallowed up as part of a divorce settlement. Or if they should find themselves widowed, they might remarry – not realising that in doing so they have effectively cut their children (your grandchildren) out of their inheritance as the law now favours their new spouse.
3. How can I protect my children and grandchildren from a hefty Inheritance Tax Bill?
Although you may have planned carefully to shield your own children from a large Inheritance Tax burden, have you thought about the effect on their children of an enlarged inheritance?
Although a substantial inheritance can be a blessing for your children, it can also have the side effect of increasing their own estate, making their children liable for a large Inheritance Tax bill when they pass away. By placing their inheritance in trust, your children can benefit from your estate through loans or income, without the capital forming part of their estate and causing a headache for the next generation.
4. How can I ensure my bequest is used to benefit my grandchildren?
Perhaps you have specific items in mind that you would like to provide or contribute towards for your grandchildren: education; their wedding; a first car; or even their first home.
A carefully planned trust could specify what monies are to be spent on, as well as protecting the inheritance for those it is intended for.
5. What if I don’t get time to change my Will after a new grandchild is born?
A properly worded estate plan can take into account grandchildren that arrived after its creation – even grandchildren that are born after you are gone. So talk to a qualified expert about how you can best protect your future and the future of your family.
This article is for general information only and does not constitute legal advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.