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Inheritance tax (IHT) is levied on the estate of someone who has died and is passing on their assets, so long as their estate is valued at over £325,000. Valuing and managing an estate can be complex and as such, families can hire professionals to manage the estate on their behalf through the probate system.
Applying for probate is usually facilitated through a will, in which a person will get a “grant of probate”.
Because of this, many experts detail that having a valid will in place is crucial and a recent high court case evidenced this.
The High Court case focused on who should inherit the estates of a married couple who died within months of each other.
The case, according to analysis from the national law firm Clarke Willmott LLP, showed what can happen when a deceased spouse leaves everything to their partner with no provision for what happens to their estate if their partner has already died.
Clarke Willmott LLP laid out the details: “The case itself decided on the distribution of the estates of a married couple Margaret and Alan, who each died within months of each other at the age of 71 in 2019. The couple had no children and each left behind a will appointing the other as the sole executor and sole beneficiary.
“When Margaret died of cancer in February 2019, Alan visited his solicitor to make a new will but did not execute it before he died of a heart attack in May 2019.
“This meant that Alan’s estate, including that which he inherited from his wife, passed under the laws of intestacy to his next of kin, namely his brother, sister and nephews.
“The dispute arose when Margaret’s brother and sister claimed the couple made ‘deathbed’ gifts to them before they died, but Judge Jarman QC ruled that the purported gifts did not meet the definition of deathbed gifts.
“As Alan had not updated his will following his wife’s death, his entire estate was distributed according to the law of intestacy because his will did not provide for what should happen if he died after his wife.”
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Carol Cummins, a private wealth team leader at the firm, commented on this: “This case is the perfect illustration of how a will should make your wishes explicitly clear, rather than your surviving family having to second guess the deceased’s wishes.
“It consequently reduces the likelihood of disputes. The family in this case appears to be a close one but they still end up having to have their disagreements settled by the court.”
Carol continued: “A good will should deal with any number of ‘what if’ scenarios.
“The likelihood of the sole beneficiary, whether that be a spouse or otherwise, also dying at the same time or shortly after is a big consideration.
“It is really important to deal with this in the will rather than relying on the surviving spouse to make a new will as they might not get around to it quickly enough, as here, or they might lose mental capacity and be unable to make a will.”
Carol concluded by examining how all of this could impact inheritance tax obligations: “If the will does not provide for what is to happen if the deceased’s partner is no longer living, and the estate is consequently distributed according to the intestacy laws, the opportunity has been lost to put in place inheritance tax efficient provisions, perhaps to include trusts for the wider family.
“Protection of younger beneficiaries is also important – under the intestacy rules they would become entitled to their share of the estate when they are 18 when most parents generally prefer for children to inherit at a greater age.
“Couples with no children or grandchildren will often wish to benefit both sides of the family from their combined estate on the death of the survivor and this needs to be dealt with through their wills as the intestacy rules will only benefit the family of the person who died last.”
While this can all sound worrying, affected families may be able to take action over the coming weeks as March is “free wills month.”
During free wills month, various charities will offer members of the public aged 55 and over the opportunity to have their wills written up or updated free of charge.
This will be done by participating solicitors spread across various locations in England, Scotland and Wales.
To take part in free wills month, people will need to head to freewillsmonth.org.uk for further assistance.
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