It is easy to put off making a will. However, this is the only way to guarantee that your money goes to who you want it to upon your death. If someone dies without making a will they are said to have died intestate. If a will is made before someone’s death then everything will be normally be distributed with ease. Should a will not be made however, the laws on intestacy will apply.
It is important before making a will to consider exactly what you wish to include in it and who you want to benefit from it. Financial assets such as the home, money and possessions are advised to all be included with clear statements of who will receive each; especially for example if there is a special item that you want to specifically leave to someone. If you have children under eighteen you can also make provisions for them and state who you want to care for them should you die.
The laws on intestacy provide that should someone die intestate and they have a spouse or civil partner and children then they can inherit up to £250,000 of the remaining estate. If there is a remaining spouse or civil partner and parents or siblings but no children then they can inherit up to £450,000 of the estate. Smaller estates will be inherited in full.
These statutory legacies only apply when the state exceeds the minimum value of that prescribed by law. The statutory limits applied to estates exceeding the minimum permitted are as follows:
1. If there is a husband, wife or civil partner, and children:
• The spouse/partner gets the personal chattels, the first £250,000 and a life interest in half of what is left
• The children of the deceased, including illegitimate and adopted children, share between them half what is left straight away, if they are 18 or over; and the other half when the surviving parent dies.
2. If there is a husband, wife or civil partner, and relatives but no children:
• The husband or wife gets the personal chattels, the first £450,000 and half what is left.
• The parents of the dead person, or if they have died, the brothers and sisters or their descendants, share the other half of what is left.
3. If there is a surviving husband, wife or civil partner, but no other relatives:
The surviving spouse/partner gets everything.
4. If there are children, but no living husband, wife or civil partner:
The children share everything equally.
5. If there is no husband, wife, civil partner or children:
Everything goes to the next available group of relatives.
6. If there are no available relatives:
The entire estate goes to the Crown.
Inheritance tax must be paid on all estates valued at £325,000 or more. However, spouses, civil partners and donations made to charities are exempt from inheritance tax. Other exemptions are gifts up to a certain value to those marrying or having a civil partnership, gifts of £250 to individuals (a total gift allowance of £3000 a year is permitted) and any gifts made seven years or more prior to the death of the person making the gift are normally tax free. Also where the deceased owned a business, farm, woodland or National Heritage property, some relief from Inheritance Tax is available. If inheritance tax is applicable it is payable at 40% on any amount above this.
It is also important to note that should you make a will prior to marriage or a civil partnership it becomes invalid upon that marriage or civil partnership. If therefore you wish for your assets to pass to someone other than your wife or husband or kids and so forth a new will must be made.
If you and your partner never marry but cohabit the situation can become more complex depending upon whether a will has been made or not. If it has then the process is simple. However, if a will has not been made then unlike with married couples and civil partners the deceased’s assets will not automatically pass to the remaining partner. This can come as a shock to people and it is important to be aware of this and to make a will setting out what you and your partners wishes are should one of you die. Another option is to set out a trust agreement as either tenants in common or joint tenants.
Assets that are held jointly such as joint bank accounts will normally follow the joint tenants trust process and automatically pass to the surviving partner. However, once these types of assets have been dealt with any residual assets will pass to other people in accordance with the rules on intestacy.
All is not necessarily lost however, as an application to the courts can be made under the Inheritance (Provision for Family and Dependants) Act 1975. An application can be made by a surviving dependant if they are someone who the deceased person would likely have made provisions for had they not died intestate. A claim will be permitted when the surviving cohabitee had been living with deceased as if they were married or civil partners for two years prior to their death or if the remaining partner was being completely provided for or partially provided for by the deceased just before their death.
The courts have considerable powers to determine what money or assets should be passed to the remaining partner and will choose what if any provisions should be granted to the applicant. If the surviving partner is successful in their claim they will not be exempt from Inheritance Tax as a spouse or civil partner would be.
It is often thought that upon someone’s death their will must be executed in accordance with their final wishes as stated within that will. In fact if everyone who is to benefit from that will agrees to a change or changes then they can be made. In order to do this however, an application must be made within two years of the person’s death.
Provisions of the will are changed in this way using a Deed of Variation (also known as a Deed of Family Arrangement). Originally this type of legal document was introduced in order to protect dependants who would otherwise be left unfairly deprived by a will. In reality these arrangements are mostly used to reduce Inheritance Tax.
Anyone who would have benefited from the deceased’s will and who will lose entitlement to the affected part of the deceased person’s estate must sign to agree to this on a Deed of Variation which is set out in writing. If any of the beneficiaries are under eighteen then the courts approval may be needed before a Deed of Variation can be made.
Understanding tax and wills can be really difficult. It is always best to seek advice in relation to any aspect you are unsure of rather than wait for nasty surprises to emerge in the future. What is certain is that making a will is highly desirable and is not something that should be put off.