Sam Thewlis covers the basics regarding Wills and the rules of intestacy.
Times are tough at the moment, with rising unemployment, rising petrol costs and economic downturn. What better way to cheer the nation up than to talk about dying?
It comes to us all in the end
They say the only certainties in life are death and taxes, and until someone finds the secret of eternal life, the grim reaper will find us all in the end. Despite this irrefutable fact, the majority of the UK population do not have a valid Will to determine how their assets will pass on their death.
But do you really need one? Many people think that Wills are only necessary for the very wealthy or those with complicated financial, or familial, affairs. However, in reality, by drafting a suitable Will many people could arrange their affairs in a more tax-efficient manner, and more importantly, assets would pass to exactly those chosen, rather than relying on the statutory rules of intestacy.
Intestacy
If someone dies intestate, it means there is no valid Will governing how the deceased's assets are to pass. In this situation, the Estate will be distributed in accordance with the strict rules of intestacy.
Many people think that their spouse or civil partner will inherit everything, but this is far from the case. Even if there are no children involved, the spouse may only get a maximum of £450,000. The balance of the Estate will pass to the deceased's parents or remoter relatives. Whilst this may seem a considerable sum, when considering family home values even given the recent drop, if this sum is to include the house, this may not leave much left over for the spouse to live on.
Where there are children, the spouse will receive £250,000, personal possessions plus a life interest in half of the balance of the Estate. The children will share the balance equally.
If there is no surviving spouse, children or parents, the intestacy rules will visit a number of other classes of relation in an attempt to distribute the Estate. However, it is possible that, in the absence of any surviving relatives, the Queen will inherit your money, to add to her shiny coffers. And of course, she doesn't have to pay inheritance tax…
Note that the statutory amounts available under intestacy were increased with effect from 1 February 2009. The HM Courts Service website has further details.
Jointly owned assets
Assets that are owned jointly, as joint tenants (which is a legal term which determines how most such assets are held unless the contrary is indicated) will not pass under a Will or intestacy, but will automatically pass to the joint owner.
This can ease the administrative burden for smaller Estates, but the automatic passage may mean that assets pass in a non-tax efficient way, or even to people who don't need to benefit in that way from the death of the individual concerned.
Simple Wills
Although it is possible to pay many hundreds of pounds in drawing up a detailed Will containing complicated tax planning structures, simple yet tax efficient Wills can be obtained without breaking the bank. Many charities will offer a free or discounted Will writing service if you make a bequest to their charity, but this should be weighed against the quality of tax planning advice you are likely to receive.
However, there is no requirement for a Will to be drafted by a solicitor and it is perfectly possible to write your own Will, using a do-it-yourself kit. Whilst such a Will may not be tax efficient, any Will is usually better than no Will at all, so this could be used as an interim measure until a more comprehensive document can be prepared.
One of the main reasons why any Will is preferable is the option for the beneficiaries to execute a Deed of Variation within two years of death. If a Will proves to be tax inefficient, or otherwise unsuitable in its effect, provided all affected beneficiaries agree, they may vary the term of the Will to better suit the circumstances in which they find themselves on death. It is, however, impossible to vary a document that does not exist, meaning the distribution of assets under intestacy cannot be varied in this way. Of course, how useful deeds of variation are will depend on family members actually talking to each other in order to agree the change, which, in some families, could prove challenging in itself.
By the way, if you've got any detailed questions on Wills, we have a discussion board dedicated to this topic.
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