Recently there has been an increase in interest in so-called 'bloodline wills'. But what is a bloodline will? And do you really need one? Nadine Walton of Brodies LLP explains what you need to know about bloodline wills.

What are ‘bloodline wills’?

Bloodline wills is an informal term that broadly describes estate planning measures that seek to carefully limit and control the overall value of wealth passing into the hands of a surviving spouse or partner, upon the death of the other.

Instead of a straightforward gift of all assets to the surviving partner, care is taken via a will to ensure that a proportion of the wealth of the first spouse is ring-fenced for the ‘ultimate' intended beneficiaries. Commonly, these 'ultimate' beneficiaries consist of members of the next generation, who may (though not necessarily) have been born to a previous relationship.

Bloodline wills is not a term of art, and there are not a finite number of types of wills. Rather, each will should be drafted in a bespoke way to take into account the testator's individual circumstances and objectives.

How do ‘bloodline wills’ work?

A common starting point of bloodline wills involves consideration of the nature of an individual's share of jointly-owned property, including the family home.

In England and Wales, it is possible to change the type of joint ownership of a property (even without the consent of the other joint owner) so that your interest in it no longer passes automatically to the remaining owner upon death.

If you hold an English property as joint tenants, this can be converted to a tenancy in common, meaning that each owner holds a distinct share of the asset, which they can then pass on via their will. The process for jointly-owned properties (and the terminology used) in Scotland is different, but in broad terms the same options apply.

Once your lawyer has checked and ensured that your property interests are structured appropriately, each partner/spouse can pass their own distinct share of the property to a trust created under their will. Any other assets that the individual parties similarly wish to ring-fence can also be passed to the same will trust. The surviving partner/spouse is generally then granted certain rights to the property left in the will. These rights must be considered and drafted carefully.

The important point is that the survivor does not inherit the entire property. Instead, the trustees of the first will effectively control this pot. If the survivor therefore subsequently remarries, enters long-term residential care, or becomes vulnerable to financial interference, for example, a level of protection is afforded where the assets previously owned by the deceased are concerned.

Why are the disadvantages of ‘bloodline wills’?

Preparing wills of this way can have many advantages. Preserving a measure of control over the destination of your assets while simultaneously providing for your spouse/partner is often the main goal. These types of wills aim to achieve that in the most efficient manner possible.

However, you should be fully advised upon the legal and administrative responsibilities that will apply to your chosen trustees, following the first death. The perspective and the future needs of the surviving partner should also be considered, given that they will not have completely unfettered access to the trust funds left by the first party.

The powers that you wish to give to your trustees should be drafted according to the provision to be made for the surviving partner/spouse, as well as other considerations, including taxation. For example, where only the first estate is likely to be eligible for the residence nil rate band for inheritance tax, and/or either party has been previously widowed, this may impact upon the way the trust is drafted to secure maximum available allowances. It is therefore extremely important that a bespoke approach, tailored to your individual needs, objectives and wishes is adopted.

Following the first death, be aware that there will be work to undertake in setting up the will trust properly. As a minimum, this will involve registering the trust with HMRC, and updating the title to any property which has passed (wholly or in part) to the will trust.

However, provided both parties understand and are happy to build in some flexibility to the provisions of the wills at the drafting stage, that flexibility can be of significant practical assistance following the first death. If all parties do not wish for the trust to continue, or would prefer to reduce its scope, this can often be achieved.

Summary

It’s important not be tempted to adopt a DIY or off-the-shelf approach to this type of estate planning. Your circumstances are unique and should be carefully reflected in the drafting of any trust provisions you choose to incorporate in your will. The consequences of not following such an approach can lead to increased costs and difficulties following the first death.

It is also extremely important that the position regarding jointly owned property is checked (and adjusted as necessary) before the wills are affected. For those with property interests in England or Wales, or who are domiciled there, it is important to consider how the law of England and Wales specifically affects your planning.

About the author

Nadine Walton is an English-qualified private client solicitor at Brodies LLP. She has significant experience in advising clients domiciled in England and Wales upon all matters relevant to wills, trusts and estate administration, as well as succession and estate planning. She is a full member of the Society of Trust and Estate Practitioners (STEP) England and Wales.

See also

What you need to know about the right of survivorship

All you need to know about the UK Trust Registration Service

What you need to know about discretionary trusts in wills

Images

Getty Images

Publication date: 5 June 2023

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.