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 die. And if you have, you might have thought that, because you’re married, your estate will automatically transfer to your spouse/partner. 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’s not your first marriage. Despite this downside to ‘happy families’; half of UK married couples happily muddle along with no Will in place.
Today, we want to let you know what will really happen to your estate and family, 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 statutory ‘rules of intestacy’ will come into play. These dictate how your estate is shared out amongst those you leave behind. It means that married or civil partners, or some other close relatives will inherit your estate as dictated by statute – not by what you might have wanted. In some cases, ‘your family’ may not be eligible to inherit anything, and so your estate will pass on to ‘The Crown’. In many cases the deceased’s estate will go to the spouse or the children, but there is no guarantee of that. The only way to guarantee your estate passes on in the way that you want, and provides for your spouse and children, is to make your 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(NRB) (currently £325,000 – i.e. the tax band with nil inheritance tax). However, transfers between UK spouses are currently exempt from inheritance tax altogether, and married couples and civil partnerships can pass their NRB 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. If there is no Will, and the intestacy rules are followed, where the estate is passed on to other people, who become ‘unintended beneficiaries’; it means that the spouse will lose that benefit as well as end up paying a lot more inheritance tax than need be.
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 die. Without a valid and appropriate Will this is not possible. There are some options though:
- Mutual Wills
Mutual Wills are agreed in advance, and create a binding agreement between the married couple where the survivor can’t change their Will in the future. However, because of the complexity 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 and the surviving spouse is free to do with their estate as they wish. One of the catches here is that you would need enough assets in your own name to provide the legacy in the first place and it will usually be a bit complex.
- 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 a trust for the ultimate benefit for the children. However, while the surviving spouse is alive, he/she can only benefit from the income generated by those assets if it is permitted. 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 in the way that you want, after you are gone. Our experts are able to create a Will that can ensure your estate is distributed 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.