Tony Crocker

Tony Crocker is Director of IWC Estate Planning & Management Ltd. With over 15 years’ experience, he is knowledgeable and proficient in all matters regarding Probate, Will writing, Estate Planning and Inheritance tax avoidance. In addition, he has a wealth of experience in dealing with estate settlements and issues with the capital taxes office in the event of bereavement. As a member of the Society of Will Writers & Estate Planning Practitioners, he is widely respected within the field, having helped many people at difficult points in their lives through complex probate and tax issues. Tony Crocker

Probate and Wills in the UK: What is intestacy and how does it work?

Most people are familiar with the idea that they should write a will at some point so that they can pass on any property or assets to family or loved ones. Even though most people know that they probably should write a will, many people pass away without having composed one. There are a variety of reasons for this: some people don’t believe it is necessary because they don’t feel that they own much, others may unfortunately die before it occurs to them to write one, and yet others believe that a verbal communication to a family member may suffice. In any case, when an individual dies with no written will, he or she is said to have died intestate.

In a typical situation, a will names someone as the executor of an estate. In fact, other than to dispense wealth or assets, this is the main purpose of a will. The executor is the person who carries out the instructions of the will and is accountable for property, taxes, and other legal matters. The executor may also yield these responsibilities to a solicitor. In case of intestacy, there is no executor and legal obligations automatically go to certain parties based on the surviving family members. The following is a set of guidelines for how to ascertain the next of kin in case of intestacy.

The most common circumstances surround intestacy are when the deceased dies leaving a spouse or civil partner and children. In this case, and if the net worth of the estate is £250,000 or less, the entire amount passes to the spouse or civil partner, assuming her or she survives the deceased party by at least 28 days. If the estate is worth over £250,000, the first £250,000, in addition to any personal possessions, passes to the spouse or partner. Half of the rest is distributed equally to any children.

Another scenario is when the deceased dies leaving a spouse or civil partner (from here on, simply ‘spouse’ will refer to either), and either parents or siblings. If the net estate is £450,000 or less, the spouse inherits all of it, assuming he or she survives the deceased by at least 28 days. If the estate’s net worth is greater than £450,000, the spouse receives £450,000 and half of the rest of the estate. The other half is distributed equally to the parents, but if there are no surviving parents, it is then equally distributed among the deceased’s whole-blood siblings. However, if the spouse survives the deceased, and there are no parents and no whole-blood siblings, the spouse receives the entire estate– again provided that he or she survives the spouse by a minimum of 28 days.

These rules only apply to spouses to whom the individual was married to or in a civil partnership with at the time of death. A spouse from whom the deceased had already divorced is not considered for next of kin in the case of intestacy. However, partners whose separation was only informal may still stand to inherit under the rules of intestacy.

When the deceased leaves children, but no spouse, the entire estate is divided equally amongst children, which they receive once they are 18 years old or older. Thus, adult children receive inheritance immediately upon the execution of the will, while minors must wait until they reach majority status. It should be noted that it is possible to prevent children from accessing the entirety of an inheritance by establishing a trust (because many parents doubt the financial acumen of newly-adult children). However, that is a matter for another article.

In the case of the deceased leaving neither spouse nor children, the net estate passes to the deceased’s parents in equal shares. If there are no parents that survive the deceased, the estate is split equally between any whole-blood siblings. When there are no living siblings, the next people in the queue are grandparents, who receive equal shares of the estate if there are no spouse, children, parents, or siblings. If the deceased is sans surviving grandparents, whole-blood uncles and aunts are next; they receive equal shares. In the absence of whole-blood aunts or uncles, half-blood uncles or aunts receive equal shares.

To complicate this already complex matter, if any of the aforementioned parties is deceased, but has children, the children receive equal shares of what would have been the share of the original party. For example, if a person dies leaving no spouse, children, parents, grandparents, aunts or uncles, but has two surviving cousins, each cousin would receive half of the estate. This principal operates as a cascade through the generations; perhaps those cousins from the example are no longer alive, but their children are. In this case, the cousin’s children would receive equal shares of the estate.

If it has been determined that the deceased has not been survived by any spouse, parent, child, sibling, grandparent, aunt or uncle, or any of their offspring, if someone has died intestate, the entire estate is then passes to the Crown. So, if you happen to be a single person with no living relatives and you do not want your estate going straight to the government when you die, be sure to leave a will! Once again, verbal instructions to family, friends, or loved ones are not sufficient; a written will is required to establish who receives what and how much of it they receive. 

If you find that you are still confused about intestacy (and it is quite a detailed subject), please refer to this concise and informative resource.

Once the next of kin has been identified through the rules outlined above, that person applies for a grant of representation, which grants the person the legal right to manage the property and estate of the deceased. However, this person does not need to apply him or herself directly, which is why IWC Probate Services is happy to manage the task. This person is responsible for paying any inheritance tax (only necessary if the estate is worth £250,000, and then a 40% tax on anything above the so-called ‘nil-rate band’) and taking care of any debts that the deceased may have left.

While these rules are in place for the many people who do not leave a will, it is highly recommended to write a will and name beneficiaries so that your wealth and assets are dispensed with in a way that you find satisfactory. Intestacy can often be a headache for those involved. If you aren’t sure about how to compose a will, check out these resources for some guidance

Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy and save money with NerdWallet’s best credit cards. 

Making a claim for financial provision

 


 
In an increasing number of instances, children and loved ones who have expected to be financially provided for in a deceased’s Will, are bitterly disappointed when they find they have been left with nothing.
 
This can have a devastating effect on the individual and their family, who may have been relying upon this money to help them out of a financial difficulty.
 
If this sounds like you, then you may be able to contest the Will and claim for reasonable financial provision.
 
Under the Inheritance (Provision for Family and Dependants) Act 1975, you may either contest the fact that you were left nothing at all, or that you were not left the amount of money to which you are certain you should have been.
Whether or not you can make a claim for reasonable financial provision all depends on your relationship with the deceased, when they were alive.  Current or former spouses, children (blood, adopted and step children), civil partners and anyone who were receiving some kind of financial maintenance from the deceased at the time of death may be eligible.
A reasonable financial provision claim will usually be heard in a court and various aspects of the case will be taken into consideration, including the relationship you had with the deceased, your financial circumstances and the amount of money you were left, if anything at all.

Inheritance tax threshold frozen until 2019

 

News last week that the inheritance tax threshold is to be frozen at £325,000 until at least 2019, came as no surprise to most people. This is despite having been told that it would rise in 2015-2016 and would eventually reach £1m.

Unfortunately, it does mean that many more of us will be caught up in the net of inheritance tax (IHT), whilst the government ploughs money into social care reform.

Early figures suggest that around another 5000 middle class individuals will find themselves liable to pay IHT as a result of these recent rulings.

As a result, those who feel IHT may now be applied to their estate are being urged to take steps now in order to protect assets from IHT as much as possible.

Research from Unbiased has revealed that around £448m was wasted by tax payers last year, who failed to plan effectively and whose money therefore went to the tax man.

Don’t wait until it’s too late. Protect your loved ones and make sure you have plans in place so that they will be able to claim as much of your estate as possible.

Adding people to deeds

 

We are often asked whether it is worth not only leaving the family home to a spouse or partner in a will, but adding them to the deeds, too.

Although whilst you’re alive, your other half may feel more secure by having their name added to your property’s deeds, it makes no difference when it comes to probate.

So long as you have left explicit instructions in your will that you want your partner to inherit your house, this will then be carried out to the letter. If, however, you have not made out a will giving these instructions, then the law of intestacy may reveal other claimants and the property could then be divided among these individuals, even if it has been placed in joint names.

Nor can any inheritance tax advantage be gained by having deeds in joint names, as assets will automatically be transferred to the surviving spouse, in accordance with English probate law.

If your wife, husband or partner have been provided for in your will, and are happy for deeds to remain in your sole name, then why not save yourself the money and effort of changing the property deeds?

Inherited land – what to do next

 

 

If you have  inherited land after the death of a loved one, it is vital that you act instantly and appropriately.

 

By completing an assent document, you are formally requesting that the land that has been left to you is to be legally transferred and documented; in effect making you the new owner.

 

If you are not the executor of the deceased’s estate, then the executor will need to be a party to the assent after probate has been granted, and they have been given the go-ahead to distribute any remaining assets, as instructed by the will.

 

You must ensure that these legal formalities take place and are carried out correctly, particularly if it is your intention to sell the plot of land in the future, when ownership must be proven.

 

A professional probate expert will be able to advise you and the executor if necessary, on how to carry out all aspects of asset distribution in a legal manner.

 

When will I get my inheritance?

 

 

Very often, we’re asked “When will I get my inheritance?”
Unfortunately, it’s often difficult to give a fixed time limit on the probate process and how long it takes to probate a will.  And, if the deceased failed to prepare a will, the process of intestacy can often take a great deal longer, if relatives need to be researched and located.  It is therefore always advised that they should have a will written and updated in their lifetime.
The executor of the will needs to pay all debts and taxes before they can begin to think about distributing any remaining assets among the next of kin. 
For a simple estate, this can take up to six months.  For intestacy cases, contested probate or more complicated cases, this can even take up to a number of years.
A word of warning – we are seeing increasing cases of individuals who expect, and even plan their finances on receiving a sum of money from their parents or relatives.  Unfortunately, with the rising cost of living and care home fees, many are disappointed and left in financial difficulty, when they find the expected inheritance has already been spent or has not been left to them.

Probate properties and Council Tax

Owners of probate properties may be interested to learn that several local authorities are making changes to Council Tax benefits which apply to empty homes in a bid to bring in more income.
Councils including Teignbridge District Council are adopting these changes which have been titled: “Localisation of Council Tax Benefit and Technical Reforms to Council Tax”.
 
Due to come into force in April 2013, the new guidelines state that:
- a 50% premium will be added to homes which have been empty for 2+ years
- only 50% discount will now apply to unoccupied properties which are undergoing major repairs for a period of twelve months
- a full 100% exemption for empty properties will be reduced from six months to one month only  
 
How probate properties are to be dealt with seems to vary between local authorities but in most instances, they remain unaffected by these changes and continue to be exempt from Council Tax.  This seems sensible, given the amount of time it can take for probate to be settled.  However, it is always worth checking your specific circumstances with your local Council Tax department.

Inheritance Tax relief and holiday homes

UK holiday home owners were dealt a bitter blow recently, after a specific court case was heard, which found that a specific holiday bungalow was in fact considered to be an investment – a ruling which meant that the owners would not in fact quality for inheritance tax relief.
Those holiday homes which are likely to be considered an investment are those which are operated as a business, or are let out to other individuals periodically, for a fee.  This includes ordinary homes and outbuildings.
The ruling, which is thought to affect around 60,000 people in the UK, came about when a family disputed HMRC’s decision that their holiday home, in which they all had a share, was in fact an investment.  Because the services offered to customers were limited in contrast to a hotel, HMRC argued, it could not be classed as a business.
Second home owners are therefore being advised that, if a specific level of services is not offered along with the property, then their holiday home will be considered an investment and no inheritance tax relief will be available when the property is passed on through death.

Inheritance Tax – an introduction

 


 
Inheritance Tax is usually collected by HMRC when a person dies. 
 
The tax is calculated by the executors of the Will, according to the value of the specific estate and all estates above the value of £325,000 (known as the “nil rate band”) will fall liable.
 
For example, Mary is a lady of 86.  She dies having made a Will and has a simple estate to pass on, owning a house with a probate valuation of £300,000 and £40,000 in her savings account.  After all bills and funeral expenses have been paid, the executors of her Will are left with £330,000.  Inheritance Tax will therefore apply to £5000 (the difference between £330,000 available and £325,000 nil rate band).  At the standard rate of 40%, this means the executors will need to pay £2000 before distributing the rest of the assets.
 
In most cases, IHT planning and calculations tend to be much more complex than this, so it is always advised to use the services of an estate planner and probate practitioner who may be able to minimise any Inheritance Tax due.
 
If you want to prepare your Will, it is worth remembering that if you give more than 10% of your estate to charity as a legacy, the final Inheritance Tax due will be charged at 36%, rather than 40%.  In this way, you can see that if Mary had decided to leave a charitable legacy, then HMRC would have taken £200 less from her estate.
 
It may be that you’re part of a married couple or have a civil partner.  In this instance, when one of you dies, the other can inherit your half of the entire estate without paying any Inheritance Tax at all.  What’s more, when the last remaining partner dies, providing you left everything to them, the nil rate band is doubled, so Inheritance Tax will only fall due if your joint estate is valued at over £650,000.
 
You may see then that it makes sense to try and reduce the value of your estate before you die.  One way you can do this is by making monetary gifts in the form of “potentially exempt transfers”.  This however, is only valid should you live for seven years after the gifts are made.  Up to £3000 can be given away in each tax year.
 
Other types of gifts will help you to minimise Inheritance Tax liability, regardless of how long you live.  These include charitable gifts, gifts to your partner and gifts of up to £250 to whomever you like.
 
Inheritance Tax must be paid within six months of the person’s death but in certain circumstances, you may be able to pay instalments over several months, with added interest.

Probate dispute sees home destroyed

 


 
Although the number of Wills being challenged is on the rise, even the IWC team was shocked by the recent case of Tony McGuire and the ongoing probate dispute with his siblings.
 
Mr McGuire’s father died in 2005, at which point Tony and his family moved into his father’s home; despite, it seems, not realising that his brother and sister also had equal shares in the property.
 
A complex legal dispute over probate ensued, during which time Tony invested around £200,000 of his own savings, extending the property and building a garage.
 
The case came to a head over the last few days, when his brother began eviction proceedings.  Rather than potentially losing his home and seeking legal advice, Tony instead applied for permission to demolish.  However, presumably impatient with the slow process, he took matters into his own hands and took to the house with a sledgehammer.
 
It would be interesting to read more details about this case; particularly why it was not recognised from the outset that each sibling had been left an equal share in the house and why this particular dispute still hadn’t been settled after seven years.
 
What a shame that this probate challenge wasn’t dealt with differently in the early stages after the late Mr McGuire’s death

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