When the Mirror Doesn’t Work

It is fairly standard, these days, for a couple with children to put in place “mirror wills” whereby each parent leaves their entire estate to the other, if they are the first to die, or to their children, if their spouse has died before them. It is a simple and relatively tax-efficient way of dealing with an estate, and advisers often recommend it. It is not always the right solution, however.

This was highlighted by a caller to a recent radio phone-in on consumer finance, who complained that his parents had been advised to make mirror wills.  His father had died leaving his entire estate to his mother, who by the time of his death had dementia. The couple had not made lasting powers of attorney and the son found himself unable to access the assets of either of his parents to pay for the care now needed to look after his mother. One suspects that his parents were also advised to make powers of attorney in favour of their son, but decided not to on the grounds of cost, or because they did not fully trust their son. If they had done so, there would not have been a problem, but it does highlight the advantages of Wills structured differently. If the parents did not want to appoint their son as their attorney, wills leaving assets in trust for the survivor as life tenant, with professional trustees, might have been a better solution.

Another situation is where one or both of a couple were married previously but their first partner has died.  The Inheritance Tax allowance known as the “Nil Rate Band” (Currently £325,000) is transferable to a surviving spouse. The unused allowance from more than one deceased spouse can be used, but only up to a maximum of one, complete, Nil Rate Band. Therefore, on the death of someone who has remarried after being left a widow/widower who had inherited (tax-free) from their previous partner, it makes sense to use that transferable allowance on their dying first, as it will be available again on the second death. Instead of leaving their entire estate to their spouse, therefore, the married widow/widower should consider leaving up to the full Nil Rate Band amount to a trust or to their children, if their surviving second spouse is already well provided-for.

The bottom line is that everyone’s situation is different and, although we know we are going to die (100% likely, unfortunately) there are a number of possible scenarios that need to be thought through for every individual. It makes sense to plan for a couple together, but exactly the same Will may not be appropriate for them both.

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