TFP_Wills_WO.png

What if I Die Without Making a Will – Rules of Intestacy

If you die without a Will, then the government will decide who will inherit your estate in accordance with the Laws of Intestacy. These were drawn up in the 1920’s, and despite

major revisions in 2014, may not accord with your wishes. Depending upon circumstances

and the size of your estate, your spouse may end up sharing your assets with your children.

Or, if you are an unmarried couple, then your partner may not get anything.

 

If you do not make provision for young children, then the authorities will decide who is best

placed to look after them, which may be hugely upsetting and disruptive. It can also mean that your partner (if you are not married) does not automatically become guardian of young children. 

If you die without making a Will, your ex-spouse may be entitled to claim part or all of your estate in certain circumstances. Even if your ex-spouse cannot make a claim, the assets you leave in trust for your children may fall under their control.

 

The Laws of Intestacy in Scotland and Northern Ireland differ from those in England and Wales.

 

Lasting Powers of Attorney

 

A Lasting Power of Attorney (LPA) or  Welfare power of attorney (If in Scotland) is a legal document that allows a person to appoint a trusted person to handle their financial affairs and their health and welfare. Both documents are extremely beneficial and is usually seen as the final piece of the process of planning and protecting your estate.

 

An LPA allows the person (Donor) to plan and choose:

  • What decisions you want to be made on your behalf

  • Who will make those decisions

  • How you want them to make those decisions

 

The Mental Capacity Act 2005 created a Code of Practice that must be followed by the people appointed to act on behalf of the donor which not only protects the donor, their assets and

health choices but also assists the people appointed to ensure that they are acting in the

best interests of the donor.

 

If a person in England loses capacity without an LPA or an EPA (Enduring Power of Attorney

which was replaced by an LPA in 2005 and can no longer be created) then joint assets can

be frozen while the family apply for receivership from the Court of Protection which is an expensive and cumbersome process.

Children’s/Grandchildren’s Trusts

If you do not make provision for your children’s financial future, then whilst the child is under

the age of 18 years, their inheritance is held under a legal trust for their benefit. This is a complex and expensive legal procedure, as it involves an application to the courts to allow for the trust to

be established. In addition to this expense, after the child reaches 18, they are quite free to spend (or worse squander) it.

Many people do not feel that this provision is suitable and therefore include this special and flexible trust in their professionally drafted Wills.

Through the Children’s Trust, the parents can place an age restriction on the inheritance of

21 or maybe 25 years of age. In addition, they would also nominate trustees. These are people

they have total confidence in to manage the trust for their children until they become of age

and thus eliminate any costly and complex court fees.

These are also exceptionally flexible trusts. Should the trustees feel that it is suitable,

they can advance funds to the children prior to the age of inheritance. For example,

should a child need medical care or require funds for university.

If you have disabled or handicapped children, you can also make further long term,

secure financial provision for them.

 

Probate (Estate administration)

 

It is the responsibility of the Executors appointed in a Will to administer the Estate, but there

is more to the role than many people realise. The moment the Testator (the person who has

made a the Will or given a legacy) dies, the role of the Executor(s) (person or institution appointed by a testator to carry out the terms of their Will) begins and there are some very important

initial duties to fulfil before distributions can be made to beneficiaries:

  • Securing the assets. Executors are now legally responsible for the assets of the Testator and may need to secure the property and belongings, e.g. change the locks on the property, switch off utilities etc.

  • Insuring the assets. Executors must ensure that the house and contents are insured.

  • Arranging the funeral, which is an Executor duty, but normally involves the family

  • Assessing the death estate assets & liabilities

  • Calculating whether there is an Inheritance Tax liability, completing the relevant forms, agreeing with HMRC and arranging to pay HMRC.

  • Arranging for the Grant of Probate, which gives legal authority to the Executors to deal with the Estate

  • Calling in assets

  • Paying debts and liabilities

  • Completing Estate Accounts

  • Distributing the Estate according to the Will

 

Sadly many family members are appointed as Executors in Wills and have no idea of the Executors’ responsibilities and often do not know they have been appointed in the Will until the Testator dies.

The great news is that Executors who do not feel able to complete the role can appoint us to deal with the estate administration taking away the burden when many are grieving.

 

Inheritance Tax

Inheritance Tax (IHT) is paid if a person’s estate, that’s their property, money and possessions, (including any gifts made within the last 7 years before their death that aren’t exempt) is worth more than the IHT threshold when they die.

 

There is a tax-free allowance called the ‘nil-rate’ band. This is currently £325,000 (fixed until

April 2021). In general terms, if the value of the estate exceeds this figure, and the estate isn’t

left to a spouse or civil partner or to a charity, (and isn’t eligible for reliefs such as agricultural

or business relief) then the excess will be liable to IHT at 40 per cent.

 

From April 2017, estates are set to benefit from an additional residential nil-rate band (RNRB)

of £100,000 (rising to £175,000 by April 2020) where the deceased’s residence is left to their

direct descendants (children, step-children, adopted and fostered children and their respective spouses and civil partners). Where an estate has a net value of more than £2m, the RNRB is withdrawn at a rate of £1 for every £2 over this threshold.

 

From 2020, if the nil-rate band and RNRB are both rolled over unused on the first death to the surviving spouse or civil partner, on the second death this would mean there would a tax-free

nil rate band of £1m available.

 

The rules involved in inheritance tax are complex and it is for this reason alone it is important to discuss your situation with us, as only then will you be able to understand its potential effects on you, whether your loved ones will lose out on some of their inheritance and, more importantly, what can be done through us to reduce or even eliminate its effects.

INHERITANCE TAX PLANNING, WILL WRITING, TRUSTS AND TAXATION ARE NOT REGULATED

BY THE FINANCIAL CONDUCT AUTHORITY.