Will planning after the death of a spouse requires careful review. A widow’s assets, tax position and family obligations may have changed significantly, particularly where trusts are involved. This article provides an overview of the key implications to consider when undertaking will planning for widows.
Reviewing the Deceased Spouse’s Will
The first step should be to review the late spouse’s will, if there is one. This helps establish what assets passed to the widow outright, what assets passed to others, and whether any trusts were created on the spouse’s death.
The deceased spouse’s will should also be checked to confirm whether it was a mirror will or a mutual will.
Mirror wills are commonly made by spouses in similar terms, but either spouse remains free to change their will later.
Mutual wills are different. They may involve a binding agreement not to revoke or alter all or part of the will. If mutual wills were made, the widow’s freedom to change her will may be restricted and this should be identified before any new will is prepared.
Confirming How Joint Property Was Held
The family home is often the most valuable estate asset. It is therefore important to confirm how it was owned.
Jointly owned property is usually held in one of two ways:
- Joint tenants – the deceased spouse’s interest passes automatically to the surviving owner by survivorship, outside the will.
- Tenants in common – each owner has a distinct share, which passes under their will or, if there is no will, under the intestacy rules.
If the property was held as joint tenants, the widow will become sole owner of the whole property.
If it was held as tenants in common, the late spouse’s share may have passed into a trust or to other beneficiaries. This needs to be viewed in conjunction with the late spouse’s will or intestacy to determine where it has passed.
Where the property was held as tenants in common, the reasons for this arrangement should also be confirmed. It may have been chosen for tax planning, asset protection or to preserve part of the property for children from a previous relationship. Those reasons may remain relevant to the widow’s own planning and should be considered before a new will is drafted.
Trusts Created on the First Death
A widow’s will can only dispose of assets that they own personally. If assets are held in a trust created by the late spouse’s will, the widow may have rights to income, occupation or benefit, but may not own capital.
These can have practical and tax implications. Clients often do not fully appreciate the effect of a trust and may believe they own trust assets absolutely. If a widow believes they own assets absolutely and can therefore gift them in their will, but those assets are actually held in trust, the proposed will structure may not achieve the intended result.
It is therefore important to establish exactly what interest the widow owns before drafting a new will. This is often one of the most important parts of will planning for widows.
Example
A husband and wife have children from previous relationships and broadly wish for those children to benefit equally. They use life interest trusts on first death, and the husband leaves his share of the property to his children subject to the wife’s life interest.
If the wife does not appreciate that she only owns half of the property following the husband’s death, she may make a will leaving all her estate equally between her children and stepchildren, not appreciating that her stepchildren will already become entitled to the husband’s share of the property when the life interest ends.
Understanding this position before preparing the new will may alter the planning entirely. For example, she may decide to leave her own share of the property to her children and divide the residue of her estate between her children and stepchildren.
Will Planning for Widows and Inheritance Tax
Transfers between spouses and civil partners are exempt from inheritance tax. In addition, the survivor’s estate may benefit from unused inheritance tax allowances from the first spouse to die.
The Nil Rate Band (NRB) is the amount of an estate that can usually pass free of inheritance tax. Where the first spouse did not use all of their NRB, the unused percentage may be transferred to the surviving spouse’s estate.
There may also be Residence Nil Rate Band (RNRB) available. This can apply where a qualifying residence is left to direct descendants, such as children or grandchildren, subject to certain conditions. If unused on the first death, the unused percentage may also be transferred to the survivor’s estate.
These allowances can be valuable, but their availability will depend on the facts, including how assets passed on the first death, whether trusts were used, the value of the estate and whether the home ultimately passes to direct descendants.
Executors of the widow’s estate will usually require records from the first death, including the late spouse’s will, grant of probate, inheritance tax papers and details of asset ownership. This will be essential to make the claim for the transferable allowances.
Use of a trust on the first death may affect the availability of these allowances and should therefore be factored into the widow’s planning.
For example, if a NRB Discretionary Trust was used on the first death, some or all of the NRB may already have been utilised. If the trust took a share of the home, which is often the main estate asset, this may also impact the availability of RNRB on the widow’s death.
Capacity and Recent Bereavement
A person making a will must have testamentary capacity under the Banks v Goodfellow test. They must understand that they are making a will, broadly understand their assets, appreciate those who may expect to benefit, and not be affected by a mental disorder that influences their decisions.
Bereavement does not automatically mean that a widow lacks capacity. Many people are fully capable of making a valid will shortly after losing a spouse.
However, recent bereavement can be relevant, particularly where there are concerns about vulnerability, confusion, pressure from family members or significant changes to previous testamentary wishes.
The case of Key v Key [2010] EWHC 408 (Ch) is an important reminder. In that case, an elderly widower made a new will shortly after his wife’s death. The court found that bereavement, combined with other factors, affected his testamentary capacity.
The case does not prevent will-making after bereavement, but it does highlight the importance of careful assessment, detailed attendance notes and, where appropriate, medical evidence.
Will Planning for Widows and Blended Families
Will planning can be particularly sensitive where the marriage involved a blended family.
The widow may have their own children, stepchildren, children of the late spouse, or relatives of the late spouse whom the couple had previously intended to benefit.
Following the spouse’s death, the widow may wish to reduce provision for the late spouse’s family or remove them entirely from their will. They are legally free to do so, unless restricted in full or part by mutual wills or trusts, but doing so may increase the risk of a dispute.
Potential claims may arise under the Inheritance (Provision for Family and Dependants) Act 1975. Eligible applicants can include children, someone treated as a child of the family, or a person who was being maintained by the deceased immediately before death.
Excluded family members may also seek to challenge the validity of the new will on grounds such as lack of testamentary capacity or undue influence, particularly if they benefited under an earlier will.
A carefully drafted will, supported by a letter of wishes explaining the reasons for the widow’s decisions, may assist executors in responding to any future challenge.
Will Planning for Widows: Conclusion
When carrying out will planning for widows, it is important to review the late spouse’s will, establish how jointly owned assets were held, and identify whether any trusts were created on the first death.
Consideration should also be given to transferable inheritance tax allowances, testamentary capacity where bereavement is recent, and the possibility of claims arising from blended family arrangements.
Failure to consider these issues can result in a will that does not achieve the widow’s intentions or creates avoidable tax and practical difficulties.
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This article is provided for general information only and does not constitute legal advice. Any advice, wording or clauses referred to are illustrative and should not be relied upon as precedent without full consideration of the client’s circumstances, the will as a whole, and the law in force at the relevant time.
