How to avoid inheritance disputes

How to avoid inheritance disputes

Over the past few years, there has been a rise in estate disputes, which is thought to be a result of cohabiting couples and blended families. Knowing how to avoid inheritance disputes after someone dies will save a lot of emotional anguish at a time when you are grieving. Let’s look at some common scenarios and ways you can protect your family’s legacy.

Due to modern family structures, the level of family wealth has increased, which is leading to contentious probate cases. A ‘contentious estate’ is where multiple parties all feel they have a claim in someone’s estate. One of the key findings by various legal professionals is the increase in the number of disputes affecting cohabiting couples and those who have remarried. A Will is essential to ensure the deceased’s estate is distributed fairly.

Another factor is the increased level of wealth in older generations, which has risen significantly over recent years and is compounding inheritance issues.

Cohabiting couples

“1 in 5 families include cohabiting couples”

First, let’s look at why this issue is affecting cohabiting couples more than married ones.  Last year, according to The Office for National Statistics, one in five families included cohabitating couples.

Many people wrongly believe that if they have been cohabitating for a certain length of time, they will be considered as having a ‘common law marriage’. But no such legislation exists. Unless there is a Will in place, cohabiting couples are not protected in terms of inheritance when their partner dies.

In reality, the surviving partner won’t receive anything from their partner’s estate. They can attempt to make a claim against the estate for ‘financial provision’, but there are no guarantees this will be granted. There have been rare cases when someone who’s financially dependent on their partner has succeeded in such a claim. Successful claims tend to result due to the existence of previous Wills or extenuating circumstances, such as care needs.

Blended families

“1 in 3 families in the UK are blended”

Now let’s look at how this problem is affecting blended families. A survey by STEP (Society of Trust and Estate Practitioners), revealed that one in three families are blended. A ‘blended family’ is where a couple have either remarried or they are cohabiting, and there are children from one or both past relationships.

Disinheritance is a major concern for blended families. Without a Will in place, it’s possible that through the deceased’s spouse, children from their past relationship could stand to inherit over the deceased’s children.

Where there are multiple parents, especially those who fall within the Baby Boomer generation, there is often an increased level of wealth. The term ‘Baby Boomer’ applies to those born within 1946 and 1964. Many consider Baby Boomers to be the most affluent generation that has ever lived. They are the most likely to own their own home and to be mortgage-free.

Estate values are rising

“1/3 – the rise in estates valued at more than £1 million”

Modern family structures and the Baby Boomer generation has resulted in higher estate values, which is leading to more disputes. According to HMRC, the number of estates worth over £1 million has risen by a third.

If you fall within the Baby Boomer group and believe you only have average assets, it’s worth having your estate valued. Your estate value could be higher than you expect. Don’t assume your family won’t fight over your estate after you pass away. Sadly, even the seemingly strongest family relationships can break down when inheritance is at stake.

If you’re a homeowner, it’s also worth checking your estate value in relation to inheritance tax (IHT). The current and often overinflated property prices could take your home over specific tax thresholds. For the financial year 2023 – 2024, the IHT threshold is £325,000, which means 40% tax will usually have to be paid on anything above this amount. There are certain exemptions, however, so it’s worth arranging an estate review to see your options.

Protecting your legacy

Whether you are part of a blended family or a cohabiting couple, arranging a legally binding Will is vital. This will help to ensure your estate goes to the people you choose after you pass away, helping to avoid any disputes in the future.

Our financial planners can carry out a review of your estate, and we will advise you of your potential inheritance tax (IHT) liabilities. We have trusted legal partners who can arrange your Will, helping you to protect your legacy and preserve family relationships.

Are you part of a blended family and concerned about future inheritance disputes? Get in touch to speak to our financial planners for advice.