Why mirror wills can be risky
SO MANY couples make mirror wills that leave everything to each other, assuming 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. Mirror wills are simply identical wills that couples make, leaving everything to each other.
But what many don’t anticipate is that, if the survivor needs care in later life, the local authority is likely to take most of the assets they have worked hard to build up together.
The Community Care Act, which came into force in April 1993, gives local authorities the power to use people’s finances and assets towards the cost of their social 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 care fees in full.
On average, it costs £572 a week for a care home and £775 for nursing care, so their life savings can quickly deplete.
Once assets fall to the £ 23,250 limit, the local authority will contribute part of the cost of care, but people 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 your estate to your partner, both your and their share of the assets can be used for care fees. And most people are also 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.
There is a simple solution — not to leave everything to each other in the first place but to leave half to your children on the first death, using a trust will.
This means a surviving spouse or 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.
This half-share is safe and will pass on to your choice of beneficiaries, regardless of whether your partner remarries or goes into care after your death.
It requires that you hold your home as tenants in common rather than joint tenants. This will mean you each own 50 per cent of the property, and 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 that 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. Couples should consider becoming tenants in common and updating their wills to include this type of planning.