My Spouse or Partner Dies After We’ve Made Mirror Wills?
Most couples, whether married, Civil Partners or not, make the sort of Will which firstly passes all the assets from one to the other when the first in the partnership passes away. Then when the second in the partnership also passes away – often many years later – the remaining assets (or Residual Estate) pass to the children or other designated persons.
These are called Mirror Wills because the individual Wills of the two persons concerned “reflect” each others’ wishes. Normally, for what can broadly be described as “simple Estates”, Mirror Wills are perfectly adequate.
However, consider what happens following the death of the first person. All that person’s assets are passed over to the second person, who now owns not only his or her own assets but also the assets of the deceased – in other words, two Estates rather than one. If the couple in question are unmarried – dependent on the value of the Estate of the deceased (i.e. if it is over the current nil-rate band threshold of £325k), there will be an immediate liability to Inheritance Tax. For, unlike in married relationships, there is no transferrable nil-rate band, so any liability to Inheritance Tax cannot be held over until the death of the second in the partnership and becomes payable to HMRC immediately.
Consider also following the death of the first person, if the surviving partner (who now owns the deceased assets as well as his/her own) then decides to change his/her Will. The potential is that the beneficiaries envisaged by person one will never receive what had been intended.
Likewise, if the survivor, again owning all the deceased’s assets as well as his/her own, goes on to re-marry and decides at that point to re-direct his/her assets to a new partner or spouse.
There are various solutions to the circumstances described above – but beware, often a Mirror Will is simply not good enough!