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.
Simultaneous deaths and survivorship provisions
In a disaster scenario it can be difficult to determine who has died first. There is a rule known as the commorientes rule that determines the order of death where it is uncertain.
That rule presumes that the eldest is deemed to have died first. In Mr Cousins’ case this would have operated to determine that he died before his sons. Ordinarily this would have meant that his estate would have passed to his sons (which would then have passed in accordance with their wills or intestacy).
A survivorship provision requires that any beneficiary named in the will must survive for a period of time, usually between one and three months. These provisions are designed to stop an inheriting beneficiary who dies soon after and having a ‘double probate’ or assets passing to the family or friends of that inheriting beneficiary. A survivorship provision will override the commorientes rule.
Inheritance tax and disaster scenarios
Careful consideration must be given to the drafting of a will if it is likely IHT will be payable on the estate. Based on current figures, IHT is usually payable at 40 per cent over £325,000.
If assets pass to a spouse, then spouse exemption applies and the estate is free from IHT. In the absence of a survivorship provision, the commorientes rule applies. The eldest will have deemed to have died first with assets passing to the younger. The IHT consequences of this must be taken into account. HMRC sets out the following example:
