Excluding in-laws from wills

09/01/2019 Mike Rowland, associate, Seddons,

It has been reported David Somerset, the 11th Duke of Beaufort, executed a Will on the 3rd of October 2014 leaving his personal £71 million fortune to members of his family and those he employed. Per the terms of his Will, he expressly excluded two of his daughters in law at the time; actress Tracy Worcester, who was married to his eldest son and current Duke, Henry (known to his friends as Bunter), and Lady Georgiana Caroline Somerset who was married to Lord Edward Somerset. 

It is apparent this express provision was included in David Somerset’s Will due to the uncertainty surrounding Bunter and Edward’s respective marriages. Indeed, it is reported Bunter and Tracy Worcester were living separate lives at the time: their divorce was finalised in 2018.  Edward was serving a two-year sentence in jail after being convicted of subjecting Lady Caroline to actual bodily harm and their divorce was finalised relatively shortly thereafter. The express exclusion of Tracy Worcester and Lady Caroline has received much vitriol from the press for being unfair. Is this justified or was this exclusion simply sound planning?

All private client practitioners meet clients to discuss passing assets on to their intended beneficiaries both in a tax efficient and controlled manner. The latter point inevitably involves a discussion regarding each intended beneficiary’s personal circumstances with consideration always given to the ‘threat’ divorce, bankruptcy or misadventure of the intended beneficiary would pose to the clients’ asset base. It is indeed only natural for clients to want the intended beneficiaries to receive the maximum amount possible rather than assets being diverted to an ‘unwanted’ third party.   

Taking the example of divorce, per the Office of National Statistics, the estimated percentage of marriages ending in divorce is 42 percent. Consequently, it is reasonable to assume most individuals will be affected by divorce either themselves or via a family member. Private client practitioners will frequently encounter clients whose child or children are either having difficulty in their marriage or going through a divorce. Such clients would understandably like to mitigate the potential exposure of their assets to divorce proceedings.

If an individual inherits assets, either absolutely or via a trust, during divorce proceedings, the Courts in the UK can be invited to consider such an inheritance and have wide powers to take such an inheritance into account. It is important to note a wide range of factors would be considered by the Courts before exercising such powers, for example, if the divorcing couple were separated before the inheritance was received, if the recipient had other assets etc.

An absolute gift of assets to an individual amid divorce proceedings is more vulnerable to being taken into consideration by the Court, compared to if they were to benefit via a trust arrangement. The most common form of trust arrangement discussed with clients in such circumstances, that can be incorporated into a Will, is a discretionary trust. Under a discretionary trust, the individual having marital problems is named as one of a number of potential beneficiaries.

Critically, the trustees of a discretionary trust have unfettered discretion over appointing capital and/or income from the trust to any of the stated beneficiaries. Each beneficiary has the mere hope of being considered by the trustees when considering the appointment of assets, but no right to any of the trust’s assets. Therefore, whilst there is no sure-fire way to protect inherited assets from divorce proceedings, a discretionary trust offers a good degree of protection. 

Due to the concept of testamentary freedom in the UK, one can leave one’s estate to whomever one wants and omit naming certain individuals, such as children or in-laws, from benefitting. This is subject to certain categories of individuals who can make a claim against one’s estate if they are excluded from benefitting, particularly if they are financially dependent upon the testator.  Most clients will not name a son-in-law or daughter-in-law as a beneficiary, preferring assets to pass to their children or grandchildren instead.

As was the case with David Somerset, some clients feel a need to expressly exclude an individual or individuals from benefitting from their estate per the terms of their Will, rather than simply failing to name such a person as a beneficiary. Frequently, in such circumstances, the Will is accompanied by a statement confirming why they have made no provision for such an individual and can be used as evidence should a claim be made against the estate.  

It is unusual, from my experience, for clients to name a son-in-law or daughter-in-law as a beneficiary of their Will. If they are so named and the clients are worried about the status of the marriage, consideration should be given to removing them as a beneficiary of their estate. If they are not removed and the client dies whilst divorce proceedings are ongoing, their son or daughter-in-law will still be entitled to their inheritance notwithstanding the impending divorce.

Clients should consider reviewing their Will with a professional if their own or an intended beneficiary’s personal circumstances change, to ensure it is drafted appropriately.

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