When it comes to writing a will, most people assume their children and grandchildren will eventually be beneficiaries. But, sometimes, this does not happen, and an estate might even end up with people who were strangers to the original owner. Perhaps surprisingly, this can be the result of common life events that can occur in any family.
If a surviving spouse remarries, for example, the inheritance may go to a new family. Or a child might divorce, and a later marriage results in your grandchildren from their previous relationship being excluded from the inheritance. To avoid situations where an inheritance goes to the wrong people, many use ‘bloodline planning’.
How bloodline planning helps
As the name suggests, bloodline planning helps by protecting your inheritance for blood relatives. It can both maximise what you pass on, and make sure it gets to your children and grandchildren, whatever the future holds. Wills might be the most common form, but you can take steps to protect your children’s inheritance right away.
Writing a will
Many assume that without a will, intestacy rules will take care of their children. However, this might not be the case. Assets held jointly with a spouse, like a property or joint account, will automatically pass to the spouse. And depending on the size of the estate, the spouse might get everything else too. This can create some perverse outcomes, for example, if someone remarries later, it can mean their new spouse inherits everything, leaving bereaved children not just losing a parent, but also watching their parent’s entire estate pass to another family.
For some, creating a new will, or revising an old one, is the only bloodline planning they need. A will’s provisions can ensure that your partner, children, and grandchildren inherit in line with your wishes.
But bloodline planning offers other ways to add more protection to your estate.
Gifting in your lifetime
Gifting is a common way of ensuring that your assets go to the people you want. It comes with the advantage that you can see your loved ones benefit in your lifetime, and if it’s done early enough, can help your family avoid inheritance tax. However, it still carries risk.
A gift puts the your inheritance directly into your beneficiary’s estate. This means that life changes like divorce, death, or a family dispute can change what ultimately happens to your gift. It’s possible to see a large part of your estate in the hands of a different family in your lifetime.
One solution is to use a Discretionary Gift Trust. This allows you to make a gift to a trust, over which you have full control. The trust will not form part of your children’s or grandchildren’s estate meaning as long as the assets stay within they trust, they are not liable for generational inheritance tax.
Using financial trusts
Trusts are commonly used in bloodline planning. Probate trusts can hold your investments and even provide an income, and because they are held by trustees, any beneficiary can access them without having to wait for probate.
A life interest trust is another method. With this, partners might put their property into a trust on the first death. The surviving spouse would have the right to remain for the rest of their life, but then the property would revert to the intended beneficiaries, their children, or grandchildren, for example. This avoids the risk of a subsequent husband or wife inheriting a property and passing it to their children.
Trusts need careful consideration since they can still be liable for inheritance tax or even create capital gains tax liabilities. But when appropriate, can ensure that your estate cares for your loved one and still protects your children’s inheritance.
The importance of good advice
If bloodline planning is important to you, it’s critical to get professional advice. Your intentions can be upset by common events, and the list of potential circumstances that might affect even a small family is bewildering.
Getting specialist advice from some like the Right Will can help ensure you have covered all possibilities. And, when you know what approach is right for you, help you navigate the complex law, so you leave gifts knowing your family will receive them. When you have professional bloodline planning, it means you can keep ultimate ownership and control of your property and other assets while you live and gives you the peace of mind that your family will be protected after you have gone.
