Estate and Inheritance tax planning
Surveys regularly suggest that around half the people in the UK do not have a will and are unaware of the consequences of not having one.
Apart from the fact that they might have no idea who will inherit their possessions, there are even more serious consequences for unmarried cohabitees and their families to consider, as the rules of intestacy show.
The number of people who fail to make a will also suggests that many have not considered whether there might be an inheritance tax (IHT) issue on their death.
Consideration of IHT is an increasingly important piece of the tax and estate planning jigsaw for individuals and their families. A death in the family or lifestyle changes such as divorce, redundancy or inheritance often mean that an individual’s or a family’s financial strategy needs be reviewed.
With IHT currently charged at 40 per cent on estates worth more than £325,000, high property values have brought even those with relatively modest homes into the realms of IHT.
Who would find this service useful?
- Owners of family businesses who are looking to pass wealth to the next generation or individuals who have recently inherited, taking the value of a couple’s joint assets above £650,000.
- Individuals who are either not domiciled in the UK themselves or their spouse is not UK domiciled.
What can we do to help you?
It is rare that IHT planning can be looked at in isolation. There are often complex family dynamics to consider and/or other business succession issues other than tax.
We like to support our clients through the decision-making process and act as a trusted advisor. Once the non-tax decisions and emotions are dealt with, clients are in a stronger position to make wealth-preserving tax decisions.
Typically we look to preserve our client’s wealth by using one or more of the following methods:
- planning using available reliefs and allowances
- drafting a new will or revising an existing will
- reviewing and advising on lifetime gifts
- establishing trusts
- life assurance
There are also a number of tax-efficient investments that can be used to mitigate inheritance tax and we will work closely with our clients’ own financial advisor or can refer clients to JWPCreers Wealth Ltd.
Rules of intestacy
It is easy for us to assume that our property and possessions will automatically go to loved ones when we are gone. Unfortunately, this is not always the case. Without a will, the strict inheritance laws called the rules of intestacy apply.
If someone dies without an effective will, they have died Intestate. The rules of intestacy are very specific regarding who can administer your estate, who will inherit from it and how much they will receive. It cannot be assumed that everything will automatically go to the surviving partner or immediate next of kin.
In an Intestacy situation, a thorough understanding of the family tree is required to apply these rules correctly as they follow the next of kin in a strict order of priority. If there are no living relatives, the estate will automatically go to the Crown.
Who do the rules of intestacy not cater for?
The rules of intestacy were established in 1925 and do not cater for some of the relationships and family situations that are common in modern day life.
They make no provision for unmarried and unregistered partners. This means that the surviving partner will not inherit any of the property and possessions owned in the sole name of the deceased.
The rules only recognise natural and adopted children for the purpose of inheritance. Because they do not recognise step-children, they will not benefit unless a will is in place.
Similarly, the rules of intestacy do no acknowledge step-parents and step-brothers or sisters. Without a will, they will not benefit.
Many people wish to leave property or possessions to friends who are not members of the family. Without a will, friends will not benefit.
Many people wish to leave gifts to charities and organisations. However, without a will, these gifts will not be made because the rules of intestacy only recognise family members.
The only way to guarantee that your property and possessions go to the people you want is to write a will.
Please contact Alastair Byrne on 01757 294959 or email him at firstname.lastname@example.org to discuss our taxation services and how we can help you.
Our tax team