"If Anything Should Happen To Me..."
- 27 April 2020
An article by Kathryn Gigg Chartered Accountants, Hunstanton
Irrespective of the eventual impact of Covid -19 on our society, which may well be profound, one thing which it has already achieved is to make every one of us aware of our mortality. The title sentence of this article is very commonly employed as a euphemistic introduction to Estate planning. Frankly, the first word should be “when”, not “if”.
It is not possible to tell exactly how many people have written Wills, but surveys indicate that less than half of those in the UK have done so and even for those over 55 the figure is only around 75%. If someone dies intestate (without a Will), specific provisions come into play, revised for deaths after 6 February 2020 as follows:
- A surviving spouse or civil partner takes the first £270,000 and all personal possessions
- A surviving spouse also takes half of the remainder
- The residue is then shared between surviving children (on attaining the age of 18)
- In certain circumstances grandchildren, siblings, parents and remoter relations may inherit
- Ultimately if there are no living relatives, the estate will go to the Crown
- Spouses who are separated but not divorced will be entitled to inherit as above, but cohabitees have no such right of inheritance
- Jointly owned property will normally pass by survivorship, outside the scope of these rules
Whilst the intestacy rules may work for very simple estates, they can give rise to unexpected practical consequences in today’s world of second and third marriages, cohabitation, estranged relatives and step-children. A properly drafted Will looks at these issues and should achieve a result which is fair to all parties and minimises the resentment (and sometimes, litigation) which could otherwise arise.
There are other practical issues where children are involved. Aside from the separate issue of guardianship, children will inherit under the intestacy provisions at the age of 18. Whilst this may provide them with a useful sum as they start work or university, and whilst some may be able to deal with their new found wealth, not everyone has the judgement or experience to handle substantial sums as soon as they leave school and the attractions of fast cars and slow racehorses present themselves. Writing a Will with independent trustees and perhaps guidance on releasing capital over a longer period may prove a wiser course of action in the long run.
Finally, the intestacy provisions are not always the most tax effective course of action. Whilst legacies to surviving spouses are normally exempt from Inheritance Tax (IHT), many other transfers, if in excess of £325,000, will be subject to tax. The position can be complex where there is a valuable main residence, and complicated family relationships can also muddy the waters.
The phrase “Making a Will won’t kill you” has stood the test of time. For those with no Will, or indeed those whose Wills have not recently been reviewed, this period of Covid-19 lockdown might prove the perfect opportunity to rectify the position, and to take professional guidance. Accountants will not normally write Wills, but they are well placed to discuss the family position and set out a strategy, and in complex cases they will work with an appropriately experienced solicitor to craft a document which should avoid unexpected consequences for those left behind.
If, having read through the information provided above, you require advice, please contact either myself or my assistant Nicola Tarry FCA on 01485 534800 or email firstname.lastname@example.org if we can assist in any way.
Mrs K H Gigg FCA
Caution: The information listed above is for general guidance only. You should neither act, nor refrain from action, on the basis of any such information. You should take appropriate professional advice on your particular circumstances because the application of laws and regulations will vary depending on particular circumstances and because laws and regulations undergo frequent change. Whilst I endeavour to ensure that the information contained herein is correct, neither I nor my firm shall be liable in damages (including, without limitation, damages for loss of business or loss of profits) arising in contract, tort or otherwise from any information contained in it, or from any action or decision taken as a result of using any such information.
© Kathryn Gigg 2020