Why make a Will?

A common misconception

When I die, everything I own will automatically pass to my spouse, civil partner or “common law” partner, won’t it? Making a Will is an expense I can do without.

Not necessarily!

The spouse or civil partner is entitled to the “chattels” (personal effects, cars etc) and the first £250,000 of the estate. They also receive one half of the balance of the estate, in trust, for life. The other half of the balance of the estate passes to the children, either immediately if they are over 18 or in trust until they reach that age.

For example, Mr Smith died leaving a wife and two children, John and Jane, both of whom were over 18. The value of his estate for inheritance tax purposes, when all his assets had been realised and his debts paid, was £300,000, plus chattels of £20,000. The estate was below the current threshold for inheritance tax of £325,000 so no IHT was payable.

Mrs Smith therefore inherited:

• £250,000 allowance
• £ 20,000 chattels
• £ 25,000 half the balance of the estate in trust.

John and Jane inherited:

• £12,500 each.

The problem

However, if the £200,000 comprised £10,000 in cash and £290,000 being the family home, owned solely in Mr Smith’s name, Mrs Smith would either have had to take out a mortgage, in order to stay in the house and pay the children, or sell the property and move elsewhere.

When Mrs Smith later died her estate would be divided in proportions laid down by the law between her family.  It is entirely possible therefore that their hard-earned money would be inherited by people she did not like or, worse, did not even know!

Where a couple are not married or in a civil partnership, the surviving partner has very few rights and the estate would be divided equally between the deceased’s children or, if there is no issue, their parents and then brothers and sisters.

Additional complications can arise in step-family situations, whether the couple is married or not. They may find that their nearest and dearest are not as protected as they thought.

House prices in the South East of England have increased rapidly over the last few years, and many of us are shareholders to a greater or lesser extent, so that beneficiaries who thought Inheritance Tax was only payable by the wealthy find themselves giving 40% of their loved ones’ money to the Chancellor of the Exchequer.
 

The solution

All these difficulties can be avoided by investing a little time, effort and money in taking sound advice and making a proper Will. This allows you to:-

• Specify whom you wish to deal with your affairs
• Specify who should get what of your personal effects
• Specify who should get how much of your money
• Put your assets in a trust for the benefit of your spouse or civil partner
• Protect your assets for the use of your ultimate beneficiaries
• Ensure your beneficiaries don’t pay more tax than necessary

Clarkson Wright & Jakes offer free seminars on Community Care, Inheritance Tax Planning and Lasting Powers of Attorney on the second Thursday of each month at our offices in Valiant House, Knoll Rise, Orpington. If you would like to attend please contact Loretta Taylor on 01689 887861 quoting reference WMW1 to reserve a place.