Overview
Mr Smith was widowed and had x2 children, John & Julia. His estate was valued at £500,000 (£450,000 house & £50,000 savings).
At the time of his estate planning meeting, Julia was happily married with children and John was a vulnerable beneficiary (drink & drug dependant in this instance). Understandably, the last thing Mr Smith wanted to do was leave anything directly to John as he was worried how his inheritance would be spent. Mr Smith was not too concerned how Julia would use the money and was quite happy for it to be spent on her and his grandchildren.
Solution
The fact that Mr Smith’s estate was valued at £500,000 means there was no inheritance tax planning required. Mr Smith decided to put his home in trust during his lifetime (see trusts & asset protection), that way, not only was it protected for John when Mr Smith eventually passes away, but it ensures it gets there in the first place. Mr Smith also had a discretionary trust will (to take care of other assets) & his lasting powers of attorney put in place.
What happened?
Sadly, Mr Smith passed away, and John & Julia are now the beneficiaries of the trust. John can have use of the money held in trust, it’s the trustee’s duty to ensure John benefits in the right way at the right time (so this could be paying rent, shopping, travel etc), rather than John receiving it all and endangering himself.
Shortly before Mr Smith passed away, Julia and her husband separated and began divorce proceedings, so this was still going on when Mr Smith passed away. Julia’s husband sought legal advice and they were rightfully finding out what Julia owned and what her husband might be entitled to. Whilst everything they had worked for together was included, because Mr Smith protected Julia’s inheritance in trust, this was not! The trustees have full discretion over who out of the beneficiary’s benefit.
Planning in place
In this instance it is hard to put a figure on what was saved for the family, but we know Mr Smiths children are now in a much better place than they could have been if Mr Smith had no planning, or even a basic will in place.
Taking no action
If Mr Smith decided not to get advice, there is a good chance that most of the wealth he had worked all his life to build would have been lost. Whether that was through Julia’s ex-husband, or through John squandering the money.
Finances aside, putting this planning in place has taken away the additional stress that no doubt would have been put on Julia at the time of her father passing away.
