Many couples make “Mirror Wills” that leave everything to each other, assuming that their estate will benefit their partner for life and then go to their children or grandchildren after that. Sadly, that’s not always what happens in real life. DO NOT fall into this easy to fall trap.
A Mirror Will explained in very simple terms.
Mirror Wills are simply identical Wills that a couple make, leaving everything to each other.
For example, Mrs Jones’s Will might specify: “I give everything to my husband on death, but if he dies before me it goes to my children.”
Mr Jones’s Will would then say: “I give everything to my wife on death, but if she dies before me it goes to my children.”
However, what most people don’t anticipate is that if you leave everything to your partner in a Mirror Will and they then need care in their later life, the Local Authority is very likely to take most of the assets you have worked so hard to build up together.
Even if your partner does not need care, a Mirror Will won’t guarantee that your children or grandchildren will receive any of your assets. In fact, your estate can pass sideways outside of your family if one of your children remarries, gets divorced or has financial difficulties.
Assets that can be used for care fees.
The Community Care Act, which came into force in April 1993, gives Local Authority the power to use peoples’ finances and assets towards the cost of their care. If a person’s total assets (including the value of their home) amount to more than £23,250 (£26,250 in Scotland or £24,000 in Wales), the Local Authority will expect them to pay for their care fees in full. On average, it costs £600 a week for a care home and £800 for nursing care, so their life savings can be used up very quickly.
Once their assets deplete to the £23,250 limit, the Local Authority will contribute partly to the cost of their care, but they will be expected to continue paying until their assets are reduced to £14,250. At this point, the Local Authority will take over the payments.
If you leave all of your estate to your partner, both your share and their share of the assets will be used for care fees.
Assets passing through what we term “sideways disinheritance”.
Another risk to your hard-earned assets is the possibility of your estate passing sideways outside of the family. Most people are shocked to hear that rather than their children or grandchildren inheriting, their estate could go to their child’s ex-spouse, debt collectors or somebody else’s grandchildren.
Avoid the problems caused by Mirror Wills.
There is a simple solution that allows you to prevent your partner having to spend your share of the estate on their care fees, or to stop it passing sideways outside of the family bloodline. The solution is to leave everything to your children on the death of your partner, using a Property Trust Will. This means that your partner can stay in the family home until their death, after which your children, grandchildren or whoever you choose will inherit your share of the estate. Your share is safe and will pass on to your choice of beneficiaries, regardless of whether your partner remarries or has to go into care.
This solution requires that you hold your home as Tenants in Common rather than Joint Tenants. Most people fall into the latter category.
If you currently hold your home as ‘Joint Tenants’, both you and your partner own a 100% indivisible share. If you die first, your partner continues to own 100% of the property – or if they die first, you continue to own 100% of the property.
If, on the other hand, you hold the property as ‘Tenants in Common in equal shares’, you each own 50% of the property, and you can leave your share to whoever you choose. By specifying that your share will go to your children and/or grandchildren on your partner’s death, your partner can remain in the property until they die but will not actually own the share. It cannot therefore be taken by the Local Authority for their care fees or be passed on to someone other than who you have chosen.
If you currently hold your home as ‘Joint Tenants’, we can arrange for this to be changed to ‘Tenants in Common’.
We know from experience that many of us DO require a care home and that it can be a very costly and lengthy stay. We all think “it’s not going to happen to me” but unfortunately it may do. Why would you take this chance? It could be the costliest gamble you lose for the sake of a few hundred pounds.
A Mirror Will is therefore NOT appropriate for a lot of couples.
Speak to NJP Estate Planning. Your Trusted Partner. Contact us.