What is “sideways disinheritance” and how could it damage your family’s wealth?
“Sideways disinheritance” locks certain members of your family out of an inheritance when you die. Learn here how to avoid it, and what we can do to help.
The UK’s divorce rate sits at about 42%, according to data published by the Evening Standard, signalling the fact that times have changed.
Indeed, with individuals having more freedom to leave marriages that are no longer working out, divorce rates have increased. If you have been divorced and perhaps remarried, and you have children, yours might be what is now known as a “blended family”.
A blended family could be any combination of parents and stepchildren with any number of varied living circumstances.
While your blended family may get along seamlessly, there is one potentially damaging phenomenon that all adults in blended families should be aware of: “sideways disinheritance”.
The subject of inheritance can be tricky when you’ve been married multiple times and have children from different relationships – so keep reading to find out what sideways disinheritance is, and how your blended family can avoid it.
Sideways disinheritance could lock your children out of your estate when you pass away
If you had children in your first marriage, were divorced, then remarried, the children from your first marriage could lose their entire inheritance when you pass away.
Without a will in place that states otherwise, your second spouse is likely to inherit your entire estate, and is under no obligation to pass any assets to their stepchildren (your children from your first marriage).
This is what’s known as sideways disinheritance, and could sadly have a grave impact on your children’s lives if it happened to them.
Unfortunately, an instance of sideways disinheritance could lead to a will dispute – a costly and often upsetting process that can go on for months, or even years.
In 2022, the Personal Finance Society (PFS) reports that, according to a survey of 1,000 UK citizens, 75% of people are likely to experience a will, inheritance, or probate dispute in their lifetime. Although your children can argue their case with the help of legal professionals, they may not be successful in disputing a case of sideways disinheritance.
Understandably, being blocked from receiving their parent’s assets when they die could be greatly upsetting to your children. If they were expecting to inherit a substantial amount, ending up with nothing could prevent them from pursuing opportunities in life, and may be a tough emotional pill to swallow.
Fortunately, this difficult situation can usually be avoided with informed forward planning. Here are three tips that could help you avoid sideways disinheritance in your blended family.
3 financial planning tips to help avoid sideways disinheritance
1. Discuss your inheritance wishes with your spouse and children, then put them in writing
There’s one simple way to ensure everyone is on the same page about the subject of inheritance, and that is to talk it out.
Although talking about death (and money) can be a little uncomfortable, openly stating how you wish to divide your assets when you pass away can help to solve any misunderstandings down the line.
Once you’ve spoken your intentions, it’s also crucial to put them in writing. Writing a full will that breaks down who will inherit your assets can make things crystal clear, and may help your family avoid a difficult dispute after your death.
2. Ringfence assets for specific people within a trust
We all imagine that our families will get along perfectly, but this is not always the case. If you wish to prevent sideways disinheritance within your own family, it is possible to ringfence funds and assets in a trust.
When setting up a trust, you will appoint a trustee, who can be a friend, family member, or professional who will enact your wishes after your death. This trustee is responsible for ensuring that the funds are directed to the appointed beneficiary after you die.
Importantly, trusts can be helpful if you wish to reserve specific assets for specific people. For instance, you may wish to leave shares to one child and property to another – and putting these in trust sooner rather than later, with the help of a financial expert, can help ensure they receive their rightful inheritance.
3. Have a professional review your estate plans
Estate planning can involve a complex set of paperwork, family conversations, and financial decisions – all of which can be overwhelming if you’re taking it on by yourself.
A Kellands financial planner can help you and your family to set the record straight before it’s too late. Our expert team are on hand to help you review your estate plans, talk through inheritance options with your whole family, and enable you to do all this tax-efficiently.
Get in touch
For help avoiding sideways disinheritance and other inheritance disputes, email us at hale@kelland.co.uk, or call 0161 929 8838.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.