Inheritance TaxJul 20 2021

How to manage estates more effectively

  • Explain how will writing be made more accessible to consumers
  • Explain the importance of trusts
  • Identify benefits of wills for families
  • Explain how will writing be made more accessible to consumers
  • Explain the importance of trusts
  • Identify benefits of wills for families
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How to manage estates more effectively
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If an individual dies without a valid will in place, their assets are at the mercy of highly inflexible intestacy rules. These rules mean that an individual’s assets are divided among their immediate family, with almost no exceptions. 

For example, if an individual is married without children, all of their possessions will go to their spouse. People who are married with children will have £250,000 worth of assets go to their spouse, in addition to the half of any remainder – the other half of the remainder will be shared between their children.

If an unmarried individual who had children dies, all possessions are shared equally between their children. Unmarried people without children will have their possessions divided equally between either their parents, siblings, grandparents, or uncles and aunts.

Further to this, if an unmarried individual without close family dies, regardless of their relationship status, the crown inherits their assets. 

Put simply, this system overlooks unmarried partners, stepchildren, or any close friends to whom the individual may have preferred to leave their possessions. Even if non-blood relatives are financially dependent on the individual in question, they will receive nothing under the intestacy laws. 

Intestacy laws are very difficult to contest.

It is possible for an unmarried partner or close friend to file a claim under the Inheritance (Provision for Family and Dependants) Act – for example, individuals could claim they were financially dependent on the deceased and therefore entitled to support.

An alternative option would be for individuals to apply for a deed of variation in order to persuade those who inherited to share the deceased’s assets.

However, both processes can be complicated, time-consuming, and ultimately cause a great deal of upset and confusion to individuals during what will already be an incredibly difficult time, without any guarantees. 

Ensuring a valid will is in place can naturally help to avoid and overcome this potential issue. It will ensure that assets are allocated exactly as the deceased intends, allowing for unmarried partners, friends and charities to receive funds. 

Avoidable bills

Intestacy rules can cause more than just emotional stress – they can also impose a financial burden for family members. Indeed, they may find themselves subject to avoidable and unexpected inheritance taxes (IHT). 

At present, it is possible to leave beneficiaries up to £325,000 tax free – otherwise known as the IHT nil-rate band.

However, dying without a will can cause complications. For example, while a spouse is exempt from IHT bills, other recipients are not.

So, if a married individual with children dies without a will, the law states that the spouse’s inheritance of the first £250,000 is tax-free, burdening the individual’s children with the hefty IHT bill. 

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