Intestacy problems on the rise
The BBC reported yesterday that according to Citizens Advice, the number of enquiries it receives about intestacy problems has more than doubled over the last five years.
Despite attempting to drive home the message that dying without a will can cause immense stress and financial pressure on those left behind, Citizens Advice still received 3,747 intestacy enquiries last year, compared to 1,522 in 2011.
These figures appear to contradict the findings of a survey carried out by YouGov last year, which indicated that 38 percent of people in England and Wales had made out a will – a rise of three percent from the previous year.
Failing to make out a will does not only mean that the funds from an estate may not be distributed in the way that the deceased would wish. It also means that any charities could potentially miss out on vital income. Also, effective estate planning will not have taken place and so the next of kin could lose thousands of pounds unnecessarily, by way of inheritance tax.
The BBC report for example, cites the case of a man who left around £700,000 but no will. His cousin administered the estate but this process took around two years and £240,000 was given to the tax man. The rest was split among 17 people, a number of whom had never even met the deceased.
Interestingly, the number of enquiries received from executors of a will also rose last year to 11,137 from 8,160 in 2011. This shows how estates are becoming increasingly more complex, making the role of executor more difficult, particularly for those who attempt to distribute an estate without taking specialist advice from a probate expert.
On 5th December 2005, same sex civil partnerships were officially recognised (thanks to the Civil Partnership Act 2004). This means that, for the past decade, it has been entirely possible for the surviving partner of a same sex civil partnership to inherit from their deceased partner in the same was as a spouse would inherit from their deceased husband or wife.
Therefore, if there is no will then the rules of intestacy will be used in order to split the estate and any assets, assuming the civil partnership has been formally recognised. The rules of intestacy state that a spouse or civil partner is the first to be recognised when splitting the estate, and after that are any children, including those from a previous relationship.
Making a will means that, assuming it is a valid will, there will be no need to employ intestacy rules – this can save time and a messy legal situation which can be upsetting for everyone at an already difficult time. A civil partnership will is really no different to any other will; it is a reflection of why you want to happen to your money, property, assets and possessions after you die. Therefore there is no reason why someone in a civil partnership shouldn’t write a will; it makes it easier on everyone involved.
For same sex couples who have not had a formally recognised civil partnership ceremony, a will is the only way to ensure that their surviving partner will inherit anything. The rules of intestacy do not cover ‘unpartnered survivors’. It doesn’t matter if the couple have been together for decades, nor how happy they may have been – if there is no will then the rules of intestacy dictate that, since there is no spouse, the children are next in line to inherit. If there are no children, it is the deceased’s parents, grandparents, siblings and so on. But a partner is not mentioned at all. This can be challenged using the Inheritance (Provision for Family and Dependents) Act 1974, but it can take a long time and be very expensive. It is better all round if a will is made in the first place.
Why writing your own will could well end up in probate dispute
A recent survey on behalf of Saga revealed that around 40% of adults now have a will in place. Unfortunately, it also seems that approximately one quarter of these individuals have chosen to write their own will, without any input whatsoever from a will writing professional – running the risk of creating a probate dispute.
A number of principal reasons were stated for this, largely based on pre-conceived (and sometimes inaccurate) ideas of cost and the legal system.
The majority (37%) had felt that it would be cheaper to prepare their own will, rather than seeking legal advice and a quarter also felt that it would make the whole process quicker. Some mentioned that they were uncomfortable with sharing such personal information with a stranger, regardless of their professionalism and guarantee of confidentiality.
There are, however, a number of risks associated with writing your own will without legal supervision, which depend upon the size of the family unit, the value of the estate and simple ambiguity. Indeed, it was noted that one in fourteen respondents had either subsequently encountered a problem during probate, or knew of someone who had, after drafting a will themselves. Nearly half said that the problem had led to a dispute and 39% said this had gone on to delay the probate process.
The complexities and legal knowledge required to write a will for all but the smallest and least complicated estates, is often misunderstood. Very often, the wording included in the will is not specific enough and is open to question by family members, which often leads to a very bitter, unpleasant and costly dispute. On the other side of the coin, it is not always advisable to mention specific sums of money which should be left to key individuals, as the value of the estate may change over time.
One of the most common mistakes is to draft one will and not regularly update it to reflect family or financial circumstances. This can mean that some new family members are left out or there is not enough money in the pot to satisfy a particular bequest.
In some instances, a will has not been correctly signed and witnessed. This renders a will invalid and, instead of the executor being able to fulfil the deceased's wishes, the probate office may be forced to apply intestacy and follow the standard rules of estate distribution, according to English law.
The lessons here are to firstly, seek legal advice from an experienced will writing or probate professional when writing a will. Then, be sure to update it whenever any significant family or financial change occurs. In this way, the probate process is much more likely to be carried out seamlessly and efficiently, without any inter-family squabbles, disappointment and bitterness.
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Why no will could mean Rik Mayall family loses out on inheritance
The Daily Mail recently reported that the family of the comedian Rik Mayall could be faced with a substantial Inheritance Tax bill because he died without having left a will.
Mr. Mayall, who was married with children, left an estate valued at just under £1.2 million. According to the laws governing succession in England and Wales (the law is different in Scotland),
His widow is entitled to inherit all of his personal property and the first £250,000 of his estate. Mrs. Mayall will also inherit a life interest in half of the remainder of his estate (meaning that she is entitled to the interest generated by that sum but not the capital itself), with the remaining half being split between his three children.
Mrs. Mayall's share of the estate is exempt from inheritance tax, but the portion of it which will be inherited by his children will be subject to inheritance tax if it exceeds the inheritance tax threshold of £325,000. Had there been a will leaving the whole or most of the estate to Mrs. Mayall, little or no inheritance tax would have been payable.
This illustrates the importance of inheritance tax planning. Making a will is a simple, relatively inexpensive but very important element in that process.
A will has two basic functions. Firstly, it ensures that your estate is distributed according to your wishes, rather than whatever the rules of intestacy stipulate at the time of your death . Secondly, it is a valuable element in setting up the most tax-efficient regime for the distribution of your estate, thereby ensuring that as much of your estate as possible passes to those whom you wish to provide for.
As the law currently stands, bequests made in terms of a will by a person to their spouse or civil partner are exempt from inheritance tax irrespective of the size of those bequests. However, if bequests totalling £325,000 or more are made to anyone other than a spouse or civil partner then inheritance tax is chargeable on the amount by which those bequests exceed the threshold of £325,000.00.
Inheritance tax planning is a specialised field. For that reason, we would suggest that you consult a professional tax-planning expert in order to make sure that your loved ones receive the maximum value from your estate.
The world is an uncertain place, and the future unforeseeable, so we would suggest that you do this as soon as possible. Once made, you can change your will and alter your tax-planning regime as time passes.
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Why making a will can reduce Inheritance Tax
Did you know that as a married person or civil partner, making a will can in actual fact help to reduce the amount of Inheritance Tax finally payable on your joint estate?
Each person's estate benefits from what is known as the "nil rate band". This simply means that assets belonging to the estate will only be taxed over the value of £325,000. Married persons or civil partners who have both prepared wills in advance with all assets going to the surviving individual can then also ensure that these assets qualify for exemption.
In addition, assets left entirely to the partner or spouse in this way, means that the deceased is not deemed to have used their nil rate band and it can be passed onto their other half, which could, in effect, double that person's nil rate band to £650,000 and ensuring that no inheritance tax will need to be paid on any assets under this value in the event of their death, even if they remarry.
Of course, if no will is made out then a deceased person's estate will be distributed according to the English laws of intestacy. This does not necessarily mean that all of their assets will automatically be passed onto the other spouse or partner but may instead be distributed among relatives. If this occurs, then their estate may not benefit from any exemptions or transfer of nil rate band – a potentially costly mistake.
#iwcprobate #inheritancetax #probate
New English intestacy rules
The new English intestacy rules came into force on 1 October 2014 – but how do they affect you?
Well, if you are cohabiting with a partner, regardless of how long you've been a couple or whether you have children together, there is no change whatsoever and you run the risk of leaving your partner with absolutely nothing.
Married with children
If you are married with children, the law used to state that your spouse or civil partner would receive the first £250,000 of your estate. The children would be given half of the rest, with the other half being kept by the remaining spouse as "life interest", handed down to the children when that spouse died. Now, the spouse is entitled to £250,000 plus half of the remainder. The other half is automatically made available to the children once they turn 18.
Married without children
Where once the surviving spouse was entitled to £450,000 and half of the rest, with the other half going to blood relatives beginning with parents, the spouse will now receive the proceeds of the entire estate.
A loophole in the law, which used to indicate that children who were subsequently adopted after the death of one or both of their parents could potentially lose their inheritance, has been closed. This now means that they will receive their inheritance, even if they go on to be adopted by someone else.
As mentioned earlier, unmarried couples run the risk of leaving their partner without any inheritance whatsoever. If there are no children from the partnership, the deceased's entire estate goes to blood relatives – parents, siblings, nieces and nephews. If there are children however, the same rules apply, except the children will be first in line to receive the inheritance.
Although we always stress to all individuals the necessity of making a will, this is especially valid for couples who may have lived together for years and even had a family but never married. Please be aware that despite these new intestacy rules, if no will is in place then your partner will receive nothing in the event of your death.
Cohabiting and intestacy
Recently, changes to intestacy laws meant that cohabiting couples can now claim more property from the estate of their deceased partner, if no will has been prepared which indicates to the contrary. This doesn't mean however, that unmarried partners have the same claim to each other's estates as they would as a married couple.
There are now around three million unmarried couples living together in the UK. Many are under the impression that there is a law which states that after living together for a number of years, that they are automatically classed as "common law spouses" and are therefore granted the same rights as married couples. In actual fact, whilst partners live together without marrying, then they have almost no rights at all, when it comes to probate and inheritance.
When it comes to a home, one of the best ways to protect each other's interest in the property is to draw up a property purchase contract either as joint tenants, or tenants in common. As joint tenants, the property is equally owned by both so if one person dies, the surviving partner will automatically inherit the whole property. As tenants in common, the partners own specific shares in the home, which then means that they should both prepare wills, indicating that on their death, the surviving partner should inherit their share.
Remarried? What your children stand to inherit
Should you have had a will drafted during your previous marriage, then the event of your new marriage will automatically mean that the original will is revoked, so will not be considered valid. If you haven't made another will since that time, then in the event of your death, the rules of intestacy will apply – just as if you had not made any will at all.
On 1 October 2014, the rules of intestacy will change and if no will is made after your remarriage, then it is likely that your spouse will benefit from all personal belongings, all jointly held assets and up to £250,000, as well as half the residual estate. The other half of the residual estate will be passed onto your children directly or held in trust for them, until they turn 18. They will not receive your spouse's half of the residual estate, even after their death.
To ensure that your hard earned cash and other assets are left to the appropriate people then, it is vital that you have another will made out, after you have remarried. Should your spouse then survive you, any assets held jointly with them will automatically pass to that person. If you have children either jointly, from another marriage or both, then make the responsible decision to draft a new will, so that they will directly benefit from your wealth, after you've gone.
Intestacy – tracing bank accounts
Unfortunately, if a person dies without leaving a will and their estate is therefore passed into intestacy, there is no easy way of tracking down their financial details, unless they have paper copies of documents stored on file.
Frankly, it’s no use hoping that a financial institution will simply pick up on the fact that a customer has died. Currently, they have no way of accessing such information, although most will write to the customer if there has been no action on their account for some time. Unfortunately, this trigger often doesn’t arise until at least after 12 months and sometimes, up to three years.
Recently, a new service has been set up, whereby a free tracing service is available for lost bank accounts and savings and investments. This is somewhat faster, with a response received from banks within three months and NS&I institutions within one month. This service can be accessed at www.mylostaccount.org.uk
Bear in mind however, that you will be expected to demonstrate how you have a valid claim on the deceased’s account, before you may be given any information or access to the funds.
Should you finally be granted access to the deceased’s financial assets, then these need to be distributed among the beneficiaries, in accordance with English intestacy law. If the value is not substantial, then you may be granted access to the funds immediately. However, more valuable accounts will only be accessible once a Grant of Representation has been awarded.
Law Society guidance on Sharia wills triggers heated debate
In a questionably misguided attempt to recognise differing faiths, the Law Society recently issued guidelines for will writers who are asked to draft a Sharia-compliant will.
Although IWC Ltd has been writing Sharia-compliant wills for some time now, the Law Society decided to formally notify will writing and legal professionals, that Sharia wills would indeed be considered valid, but only if they were signed according to the Wills Act 1837.
Writing a will which complies with English law and adheres to specific religious principles is not always straightforward, however. For example, Sharia and its derivatives including Shia and Sunni, have differing laws. What about if a Muslim dies without a will and their estate is passed into intestacy? Can their wishes regarding distribution of their assets in accordance with Sharia guidelines still be fulfilled?
Another key challenge when writing a Sharia-compliant will is that unlike wills written purely under English law, beneficiaries cannot be named at the time of writing, and are not identified until after the individual’s death. This added complication can obviously add delays to the probate process, whilst research is carried out and any disputes resolved.
This move by the Law Society has since been criticised by many will writing and law professionals, who have accused the body of being “incredibly naive” – so much so, that it is now being threatened with possible legal action.
The Lawyers’ Secular Society (LSS) argues that there are many religions being practised in the UK, and that by “bowing down” to one particular religion, the Law Society is in effect, ignoring all other religions including Judaism, Pagan and Scientology. Instead, the LSS would prefer to see all wills written in strict adherence purely to English law, to provide a just and even playing field to individuals of all religions and faiths.