It is not uncommon for people to form new relationships, where one or both parties already have children from a previous relationship. Where those couples own a property together, they are often keen to ensure that their respective (sometimes unequal) contributions eventually pass to their own children rather than to the co-owner and then potentially to the children of that co-owner.
Our advice to couples who have these concerns is usually to incorporate a safeguard in their wills.
We can do this at relatively little cost by including what is informally known as a ‘life interest trust’ in the will of both parties. This arrangement ensures that when one owner dies, the survivor may continue to live in the property but the share belonging to the first to die is protected in a trust. When the survivor dies the property is usually then sold and the share belonging to each party can pass to their respective children.
The arrangement we use in these circumstances is the same as that used in situations where clients wish to safeguard their home against care home fees. A more detailed note in that regard can be found here.
In addition, where parties are contributing unequal shares to the purchase of a property together, and they do not wish for their respective contributions to pass outright to the survivor if one of them dies, we can clearly define the contributions of each party in a Declaration of Trust. This document ensures that the proceeds of sale can be divided fairly and as initially intended by the parties in the event that the property is sold.
I recently helped Rob and Jacqui* from Skegness. Both Rob and Jacqui had been divorced previously and had children from their previous marriages. They wanted to buy a property together but wished to ensure that their own contributions to the purchase price were safeguarded for the benefit of their own children once they had both died.
Jacqui had £100,000.00 available to contribute towards the new property and Rob had £50,000.00. The purchase price was £200,000.00 and the £50,000.00 shortfall was to be covered by a mortgage. We put in place a Declaration of Trust making clear that in the event the property was sold, Jacqui (or her estate) would receive her £100,000.00, Rob (or his estate) would receive his £50,0000.00 and any remaining equity would be split equally between them after the discharge of the outstanding mortgage and payment of all costs of sale.
We also prepared wills for Rob and Jacqui which left their respective interests in the property to the survivor of them for life, and on the death of the survivor, Jacqui’s interest was to pass to her own children and Rob’s interest was to pass to his own children. Even if one party dies and the survivor then changes their will, the children of the first to die will always receive their parent’s interest in the property.
If you would like to discuss any of the issues raised in this blog in more detail, or wish to discuss your own personal circumstances, then please contact a member of our specialist Wills, Trusts & Probate team.
* Names have been changed to protect confidentiality.