Inheritance Tax 

Why making a will makes a real difference to those who survive

  • To learn about disaster provisions in wills
  • To understand what the dangers are if all the beneficiaries on a will die in one go
  • To learn about when someone leaves everything to charity in the event that all beneficiaries die
CPD
Approx.30min
Why making a will makes a real difference to those who survive

Many will have read about the recent events regarding the chief executive of Compass Group, Richard Cousins and his family.  

Mr Cousins, his two grown-up children and his partner and daughter were killed in a sea plane accident in Australia. The accident occurred on 31 December 2017, but Mr Cousins’ death has made the news once more because his will left a reported £41m to Oxfam under what is known as a disaster provision.

What is a disaster provision?

Mr Cousins’ will is available as a matter of public record, as is the grant of probate. His will was made the year he died and incorporated a provision to provide for a ‘disaster scenario’ where he is not survived by his children or grandchildren.  

This type of clause is commonly referred to as a disaster provision or default clause. These clauses are a backstop in the event that a person’s named beneficiaries (whether family members or not) do not survive the deceased. It is not unusual for people to name charities in these circumstances.

Thankfully it is relatively rare for disaster clauses to come into effect. Cases where such provisions have been relevant have been the Boxing Day tsunami in 2004 and the Malaysian plane crash.

That said, these clauses can also be operative in the event that a person perhaps only names one beneficiary in their will, has no remaining family and that sole beneficiary then predeceases them. 

What happens without a will or disaster provision?

Recent reports place the number of people dying without a will at nearly two-thirds of the population. When someone dies without leaving a will the law sets out an order of inheritance, known as the intestacy rules.

These rules will also apply if a person has a will, but it does not contain a disaster provision, and all their beneficiaries die before them or at the same time. 

In the event a person is not survived by a spouse/civil partner or issue (children and grandchildren), the order of entitlement is as follows:

  • Parents of the deceased.
  • Brothers and sisters of the deceased (if any of them have died before you then their share passes to their issue).
  • Half-brothers and sisters of the deceased (same rules apply regarding their issue if they die before you).
  • Grandparents of the deceased.
  • Aunts and uncles of the deceased (if any of them die before you then their share passes to their issue).
  • The Crown (bona vacantia).

If someone dies and they are not survived by any family members and they do not have a disaster provision, the Crown will receive the estate. Many a daytime programme has followed the exploits of tracing distant relatives when the Crown releases the bona vacantia list. In these circumstances it is not possible to benefit friends or charities, as the estate must pass in accordance with the intestacy rules.

In Mr Cousins’ case, if his will had not included the disaster provision benefitting Oxfam, his entire estate would have passed to either his parents if they survived him or, failing that, to any siblings he may have.  

Aside from ensuring assets pass to a person’s intended beneficiaries in a disaster scenario, a legacy or distribution to charity can also have the benefit of mitigating any inheritance tax (IHT). Any gifts to charity that exceed 10 per cent of your net estate benefit from the lower rate of IHT at 36 per cent rather than the standard 40 per cent.

CPD
Approx.30min
  1. What is a disaster provision in a will?

  2. Under the intestacy rules, which of the following is not a beneficiary of the will if the deceased dies without issue?

  3. What would have happened to Richard Cousins' estate if the will had not had a disaster provision benefiting Oxfam?

  4. What is a survivorship provision?

  5. If husband and wife are treated as having died in the same instant, only the wife’s own estate is taxed. True or false?

  6. In England and Wales a person cannot leave their estate to whoever they want. True or false?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • To learn about disaster provisions in wills
  • To understand what the dangers are if all the beneficiaries on a will die in one go
  • To learn about when someone leaves everything to charity in the event that all beneficiaries die

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