If you, like 23,837,253 people in England and Wales, are happily married or in a civil partnership, you might not have thought about what happens when you pass away. And if you have, you might have thought that, because you’re married, your estate will automatically transfer to your spouse. But unfortunately, that is a common misconception. While the average married couple seems to share everything, it can get complicated when one half of that partnership died without a Will in place. It gets even more complicated when there are children involved, or it isn’t your first marriage. Despite this, half of UK married adults still don’t have a Will in place. Today, we want to let you know what will really happen to your estate if you or your spouse dies without a Will, and what you can do about it.
Dying Without A Valid Will
No matter what your marital status is, if you die without a Will, the rules of intestacy will come into play, which will dictate how your estate is shared out amongst those you leave behind. These rules mean that only married or civil partners, or some other close relatives can inherit your estate, and the division of the estate is dictated by these rules – not by what you would have wanted. In some cases, your family may not be eligible to inherit anything, and so your estate will pass on to The State. In many cases your estate will go to your spouse or children, but there is no guarantee of that. The only thing that can guarantee your estate passes on in the way you want, providing for your spouse and children, is writing a Will.
Unintended Beneficiaries And Tax Allowances
When you die, your estate would normally pay inheritance tax at 40% on anything above the nil-rate band (currently £325,000 – i.e. the tax band with nil inheritance tax). However, transfers between UK spouses are exempt from inheritance tax altogether, and married couples and civil partnerships can pass their nil-rate band on to their surviving spouse. This means that, jointly, there will be no inheritance tax to pay on the first £650,000 of an estate. But this is only valid if the entire estate is passed to the spouse. So if there is no will and the intestacy rules are followed, and the estate may be passed on to other people, who become ‘unintended beneficiaries’. This means that the spouse will lose that benefit and end up paying a lot more inheritance tax than they need to.
Children From Previous Marriages
Nearly four in ten marriages in the UK are second, third or even fourth marriages. But for anyone remarrying, there is always the need to balance providing for their current spouse while making sure any children from the previous relationship are taken care of after you pass away. Without a valid Will this is difficult to do, but there are some options:
- Mutual Wills
Mutual Wills are agreed in advance, and create a binding agreement between the married couple that won’t change their Wills in the future. This is so that the survivor can’t change their will after the first partner passes away. However, because of the nature of these Wills, they are rarely recommended.
- Legacy / Asset Split
You could also arrange to leave a legacy to your children from the first marriage, and allocate the remaining assets to the surviving spouse. This ensures that any previous children are provided for in your Will, and the surviving spouse is free to do with their estate as they wish. The only catch is that you would need enough assets in your own name to provide the legacy in the first place.
- Ensure The Marital Home Is Owned As ‘Tenants In Common’
A Will allows a person to deal with solely owned assets or assets held with distinct and separate shares, such as a home. This type of ownership is known as tenants in common, and it allows them to leave their share of the property to their children and ensure they are provided for, while stipulating that the surviving spouse is protected with a right to live in the property during their lifetime.
- Leave The Estate Of The First To Die In Trust
This is a fairly popular model for couples with children from previous marriages. In this scenario, any assets from the deceased’s estate are held in trust for the ultimate benefit for the children. However, while the surviving spouse is alive, they can benefit from the income generated by those assets. This can provide the spouse with the additional income they need, and protects the assets for the children.
This is a general overview only and your own circumstances may involve matters not covered above. At Edmunds and Eve, we understand the importance of a Will for you and your unique family. That’s why we offer tailor made solutions that help you make the most of the rules around inheritance, allowing you to provide for the ones you love when you are gone. Our experts will be able to create a Will that can ensure your estate is divided exactly as you want it to be, and give you advice on how best to lower the amount of tax or fees that would be paid by your loved ones after your death. For more information, please get in touch with one of the team today.