How to avoid the “sideways disinheritance trap”
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Disinheritance (whether accidental or deliberate) can come as a nasty shock. Yet it is growing more common, especially in today’s world of non-traditional families. “Sideways disinheritance” typically refers to when a child is left out of their parent’s estate when they die. This can happen intentionally or not, perhaps due to an outdated will. Below, our Grantham financial planners at Castlegate explain how sideways disinheritance often works, how it can impact different parties and some implications for financial planning.
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What is sideways disinheritance?
Sideways disinheritance usually occurs when beneficiaries (e.g. children of a first marriage) do not receive their hoped-for portion of an estate, when the owner (e.g. a parent) dies. This may be due to a parent getting remarried after the other parent’s death, with their estate eventually passing to their new spouse due to lack of a will.
Another scenario is a parent in a second relationship and each person has a basic will. These state that everything should be left to the surviving person, and afterwards to the children (i.e. after the second person’s death). However, if you die before your partner, he/she could receive your estate and then change their will so that your children are excluded from the estate upon their own death. Perhaps your wealth passes to his/her own family instead.
The impact of sideways disinheritance
Disinheritance happens for many reasons. Although divorces are becoming less common in recent years, the higher divorce rate in previous decades has led to a rise in second and third families (where parties do not always concur on what should happen to an estate upon the death of the owner). Another factor is house prices, which are 65 times higher today than in 1970. Those with a property in their estate, therefore, likely have an asset that potential inheritors are ready to lay a claim to. A third consideration is longer average UK lifespans, where mental diminution towards the end of life can leave many people susceptible to pressure and disorientation over their wills.
Sideways disinheritance, of course, can be traumatic, confusing and enraging for those who expected something from a loved one’s estate. Those who were relying on an inheritance to help with their finances (e.g. building a mortgage deposit) may feel especially hard done by. Those looking to protect their families from animosity, jealousy and schism following their death have a strong incentive, therefore, to make sure disinheritance is carefully considered within an estate plan – especially if multiple families are involved.
How to approach disinheritance
From the perspective of an estate owner, there are sometimes good reasons to exclude a family member from your will. Maybe you strongly believe (like Sting and Nigella Lawson) that children should earn their own living when they grow up. Perhaps your relationship with your loved one irretrievably broke down and you want to leave your wealth to other people in your life. Just bear in mind that the law about disinheritance is still evolving, as the case of Heather Ilot shows. In 2015, she was awarded £164,000 from her mother’s estate despite being explicitly excluded in the will (due to Heather’s elopement at age 17).
This has brought into question the Inheritance Act 1975, which is supposed to grant everyone “testamentary freedom” (i.e. allowing you to leave your wealth to whoever you choose). Other countries like France and Spain use fixed heirship shares, and in Scotland both children and spouses are legally entitled to a share of the deceased’s estate. In 2022, the overall sense in England and Wales is that parents can disinherit children if they choose, but the reasons must be explicitly stated and a strong connection must be clear between the estate owner and the people (or causes) they wish to leave their wealth to instead.
Confusingly, whilst it is arguably now more difficult to consciously disinherit a child, it is also more likely to happen today due to outdated/non-existent wills and multiple parties laying claim to an estate (e.g. children and/or a spouse from second families). To avoid this, consider setting up a new, airtight will the moment a sideways disinheritance risk arises – e.g. on your second marriage. When someone remarries, your existing will is likely to become invalid (unless you referred to your new spouse and made the will explicitly in contemplation of your marriage).
A second option is to draw up a “mirror will” with your partner, including a life interest trust so that your children are protected. Alternatively, you could specify in your will that your estate passes into a life interest trust after your death (rather than directly to children or a surviving spouse). The “life tenant” referred to in your will could keep living in your property and receive income from assets from within the trust. If this person is your spouse and later remarries or dies, then the trust can distribute the assets to your named beneficiaries (e.g. children).
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