The making of a will is something that is often delayed by people during their adult lives. Indeed, actively thinking about and planning affairs for a time after your death can be a daunting experience. However, making a will early on is very important and ensures that your loved ones are protected in the way you wish after your death. Not only does making a will give you control over how your property is disposed of, it also can help to minimise the amount of inheritance tax your estate will pay.
A person who dies without making a will is called and intestate person. In this event, one’s estate will be distributed in accordance with the intestacy rules, per the Administration of Estates Act 1925. These are a set of rules that cannot be deviated from; therefore, your wishes may not be carried out. Married partners and civil partners both inherit under the intestacy rules. Married partners and civil partners both inherit under the intestacy rules, however the level of their inheritance will depend on various factors. For example, if you are married and have children, and your estate is valued at more than £270,000, your partner will inherit:
- All the personal property and belongings of the person who has died, and
- The first £270,000 of the estate, and
- Half of the remaining estate
The remaining half of the estate will be inherited by your children and will be divided equally among them, if more than one.
This can have inadvertent tax consequences. A married couple that leaves their entire estate to their spouse will be exempt from any tax (known as the ‘spousal exemption’). However, as shown above, the spouse does not inherit everything automatically under the intestacy rules, and thus your estate will be liable for tax on the remaining half of your estate. Many couples decide to leave everything to their spouse upon death, which ensures no tax is paid while ensuring your Nil Rate Band (your tax-free allowance on your estate, currently valued at £325,000) is transferred to your spouse in full. It is therefore important that a will is created to maximise these tax benefits.
Furthermore, a cohabiting couple will not be protected under the intestacy rules. Cohabiting partners make up the fastest growing type of family, with over 3.6 million partners cohabiting in the UK. It is therefore important to understand that a will is necessary in order to provide for your loved one.
Regardless of your age or circumstances, making a will today will ensure that your loved ones are looked after in the way you want, while providing peace of mind for the future.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email admin@audleychaucer.com or visit our Linkedin page.
John Szepietowski
December 2022