Making a Will and Reduce of Tax

 

It is easy to put off making a will. If you die without one your assets may be distributed according to the law as opposed to your wishes. This could mean that your partner receives less or family members get a share, contrary to your own preferences.

 

1. Making a Will – Why is important

There are lots of a good reasons for making a will:

  1. You can decide how your assets are shared out

  2. If you aren’t married or in a civil partnership your partner will not inherit automatically. You can make sure that your partner is provided for

  3. If you are divorced or your civil partnership has been dissolved you can decide whether to leave anything to an ex-partner who is living with someone else

  4. You can make sure that you don’t pay more inheritance tax than is necessary

2. Who inherits if you don’t have a Will?

If you don’t have a Will there are rules for deciding who inherits your assets, depending on your circumstances. The following rules are for deaths after February 1st 2009 in England and Wales. The law differs if you die without a Will in Scotland and Northern Ireland.

 

a) If you are married or in a civil partnership without children:

The spouse or civil partner wont’ automatically get everything although they will receive:

  • Personal items (such as household articles and cars, but nothing for business purpose)

  • £400,000 free of tax (or the whole estate id than less than £400,000)

The other half of the rest of the estate will be shared by the following:

  • Surviving parents

  • If there are no surviving parents, any brother and sisters (who shared the same two parents as the deceased) will get a share (or their children if they died while the deceased was still alive

  • If the deceased has none of the above, the spouse or registered civil partner will get everything

b) If married or in a civil partnership with children:

Your spouse or civil partner won’t automatically get everything, although they will receive:

  • Personal items (such as household articles and cars, but nothing for business purpose)

  • £250,000 free of tax (or the whole estate id than less than £250,000)

  • A life interest in half of the rest of the estate (on his or her death this will pass to the children)

  • The rest of the estate will be shared by the children

c) If you are partners but are not married or in a civil partnership:

You won’t automatically get a share of your partner’s estate.

If he/she hasn’t provided for you in some other way, Act 1975. To make a claim you must have a particularly type of relationship with the deceased, such as a child, spouse, civil partner, dependant or cohabit. You need to make a claim within six months of the grant of letters of administration. You will almost certainly need legal advice if pursuing such a claim.

 

d) If there is no surviving spouse or civil partner:

The estate is distributed as follows:

  • To surviving children in equal shares (or to their children if they died whilst the deceased was still alive)

  • If there are no children, to parents (equally if both alive)

  • If there are no surviving parents, to brothers and sisters (who shared the same two parents as the deceased) or to their children if they died while the deceased was still alive

  • If there are no brothers and sisters then to half brothers and sisters (or to their children if they died while the deceased was still alive)

  • If none of the above then to grandparents (equally if more than one)

  • If there are no grandparents then to aunts and uncles (or to their children if they died while the deceased was still alive)

  • If none of the above then to half uncles and aunts (or to their children if they died while the deceased was still alive)

  • To the Crown if there are none of the above.

 

3. Inheritance Tax and Your Will

 

If you leave everything to your husband/wife/civil partner

In this case there will usually not be any inheritance tax to pay because a husband/wife/civil partner count as a beneficiary.

However, if you are domiciled in the UK but your spouse /civil partner isn’t, you can only leave them £55,000 tax free.

 

Others beneficiaries

You can leave up to £325,000 tax-free to anyone in your will, not just to your spouse or civil partner. So you could, for example, give some of your state to someone else or a family trust.

IHT (Inheritance Tax) is then payable at 40% to any amount you leave above this.

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