Inheritance tax warning: Make sure your Will is valid as ‘life is unpredictable’ – act now
Inheritance tax is usually levied on the estate of someone who has died and is passing on their assets, so long as their estate is valued over £325,000. Where IHT is due, it is charged at 40 percent on the parts of the estate valued over the £325,000 threshold.
To help manage inheritance planning, Wills are often created as they can help decide what happens to the person’s money, property and possessions after their death.
Wills can also help make sure IHT costs are not higher than they need to be and while they can be created by the person passing down assets, professional guidance is usually encouraged as they can be complicated documents.
Charlotte Isherwood, Wills & Probate Solicitor at ZEDRA, commented on these complications which have been made more difficult by the pandemic.
“If the last year and a half has taught us anything, it is that life is unpredictable,” she said.
READ MORE: Inheritance Tax: Young savers ‘counting’ on inherited wealth – act now
Making a Will and then divorcing
Ms Isherwood said: “If you make a Will whilst married, appointing your spouse as Executor and/or as Beneficiary of your Will but then you later divorce, your Will remains valid. “However, if you do not update your Will following the divorce and subsequently die, your ex-spouse is treated as though they died before you.
“Therefore, they would no longer be appointed Executor, nor would they receive any assets as a Beneficiary.”
Making a Will and then getting married
Ms Isherwood also addressed what happens to wills when a new marriage is formed: “If you make a Will and later get married, your Will is automatically revoked and you will need to make a new one. The only exception to this would be a Will made in anticipation of that particular marriage.”
Cohabiting and dying without a Will
Many modern relationships do not involve marriages at all and Ms Isherwood warned this makes the need for establishing a Will even more important.
Ms Isherwood continued: “If you do not have a Will and are living with your partner but have not yet married, or do not intend to marry, you should make a Will to ensure that your partner benefits from your estate when you die.
“Wills for cohabiting couples are incredibly important. In the UK, when someone dies without a Will their estate passes in accordance with the Rules of Intestacy.
“These Rules set out a specific order of who benefits from the estate. Unfortunately, they do not include provision for an unmarried partner. A Will must be made to ensure that your partner benefits as you intended.”
Stepchildren and blended families
Ms Isherwood concluded: “Similarly, whilst the Rules of Intestacy include adopted children, they do not provide for step-children or your unmarried partner’s children. Therefore, in light of the increased number of blended families, this has become a recurrent issue for the Courts who consider claims made against a deceased person’s estate. This is costly, time consuming and extremely upsetting for an already grieving family.
“Unfortunately, many people assume that all their children will be provided for when they die but, in the absence of a valid Will, this is simply not the case.
“If you have not yet made a Will and you are a cohabiting couple, or you have concerns that your Will may not be appropriate for your circumstances, please contact us to speak to one of our solicitors.”
Impartial guidance on Wills and IHT can also be sought from the likes of Citizens Advice and Money Helper.
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