John is separated but not divorced from his wife, Karen. They have two minor daughters and John has custody. John cohabits with his partner, Sue. John has a house in his name solely, a substantial life insurance policy (his daughters are the beneficiaries), and other assets. John has done no estate planning, has given no thought to what will happen to his house and other assets, and has not made any arrangements for the care of his daughters should anything happen to him. John was killed in a car accident and left behind his wife, partner and daughters. Since John did not prepare a Will, his death created a devastating situation that could have been easily avoided through prudent estate planning.

Our previous article (published on January 8, 2007) discussed the problems that may arise when someone dies without a Will. We now want to discuss circumstances where having a Will is especially important, and how not having a Will can lead to undesirable results.

$> Minor Children:<$> Parents of minor children should have a Will. John left behind two minor daughters. Their mother is alive, and pursuant to the Minors Act 1950, they will now live with her. When you make a Will, you can include in it who you want to be the guardian for your children and the Court typically obliges.

However, if you die without a Will, the Court will appoint a guardian. Make it easy for the Court — ideally the parents should designate the same person to be guardian. Try to avoid naming a ‘couple’ — they may not be married at the time you die. The same person can be the guardian of your children and executor of your Will; however, it may be best to separate those roles, as separation may provide greater protection for your children and their estate.

How would you feel about your minor child getting several hundred thousand dollars of insurance proceeds or a house valued at over $1 million? This problem can be resolved by creating a ‘testamentary’ or Will trust which trust can delay the distribution of assets until the beneficiaries reach certain ages, e.g., receive half at age 25 and the remainder at age 30. Without a testamentary trust, the rule is “everything at maturity” — age 18.

<ingdings-Regular">n<$> Common Law Spouses: <$>There is no such thing as a “common law” spouse in Bermuda. The consequences of cohabiting rather than marrying can be disastrous if your partner dies without making any provisions for you or, if like John, never divorced their spouse.

A cohabitee whose partner dies without a Will may not be entitled to receive anything from the estate as only relations within certain categories can stand to benefit from an estate where there is no Will.

Conversely, if John had a Will, but was not divorced from his wife, she would obtain half of his estate and his children would receive the other half, to be held on trust until they reach the age of 18. Again, your partner would receive nothing. There is no legal requirement to provide for a cohabiting partner in a Will and claims brought by a cohabitee are unlly to succeed.

n<$> Divorce and remarriage: <$>Both are now very common. It is no surprise that the last thing anybody thinks about when getting divorced or remarried is making or amending a Will. For those of you who are happily married, establishing a spousal trust is an effective way to provide for your surviving spouse, while protecting your assets for the ultimate benefit of your children. The trust’s income could be payable to your surviving spouse for their lifetime, and the Will should address if, and to what extent, payments of capital may be, depending on various factors and circumstances. If the primary objective is to provide for the financial comfort of the surviving spouse, the trustees could be given broad discretion to make payments of capital to the surviving spouse when they consider it appropriate to do so. Alternatively, if the primary objective is to ensure that the trust assets be maintained for the benefit of children, the Will may prohibit capital payments or may restrict them to certain limited purposes only.

Wills are automatically revoked by marriage or remarriage (unless the Will specifically provides that it was made in contemplation of a particular marriage with the intention that the Will should sure the marriage). Unlike in the case of marriage, a Will is NOT revoked by a divorce, and will continue in force except that:

[bul] an appointment of the former spouse as executor or trustee shall have effect as if the former spouse died on the date of the court order of divorce or annulment; and

[bul] any gift to the former spouse shall pass as if the former spouse died on that date (i.e., the date of the Court’s order of divorce or annulment).

Review your Will

Make your Will, and review it regularly (every three to five years). Keep in mind any changes in your circumstances such as births, deaths, inheritances, divorces, gifts and the transfer of assets to family or trusts, changes in domicile, nationality or government policies. Update your Will to reflect those changes.

Preparing your Will should be a part of your overall estate planning to minimise stamp duty, to create an efficient plan of succession of your personal and business interests and to benefit your beneficiaries or subsequent generations.Attorneys George N.H. Jones and Leah K. Scott are members of the Wills & Estates Practice Group of Appleby Hunter Bailhache. Copies of their columns are alable on the firm’s web site at www.applebyglobal.com.This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.