Skip to main content

Insight article

March 7, 2019

Death and taxes are said to be the two certainties of life…

While we often stop and have a moan about taxes; very little thought is often given to death itself.

It is thought that nearly 60% of adults in the UK do not have a will. Therefore, when the inevitable happens, and you have not created a will, your death creates an intestacy. This means that the assets and belongings in your sole name and your share of any assets in joint names are distributed in accordance with the Intestacy Rules.

Infochart The Intestacy Rules 2023 Update

For a larger image of the above picture, please click here.

While this outcome may suit some, the Intestacy Rules are not the most tax-efficient way to distribute your assets. Further, the rules can seem outdated and arbitrary as they do not cater to cohabiting couples or long-term relationships.

If you are cohabiting or in a long-term relationship, you must create a will to ensure that your partner (and any children) are catered for following your death.

Why make a will?

If the Intestacy Rules do not distribute your assets as you would like, you must create a will. This will give both you and your loved ones peace of mind. Losing a loved one is difficult enough. A will can provide loved ones with a form of security to know that they will be supported even after you are gone.

A will can go beyond the scope of financial aspects and appoint guardians to look after young children and manage their financial affairs.

In general, your finances and your will should be reviewed every 18 to 24 months and always on a major life-changing event such as a birth, marriage, divorce or death or an increase in wealth. Taking the time to think about your assets will also prompt you to think about the Inheritance Tax liability of your estate.

Taxes after death

In England and Wales, Inheritance Tax is charged on all your assets in your sole name and your share of any assets in joint names. The first £325,000 (the current Nil Rate Band) of your assets are charged at 0%, and the remaining balance is charged at 40%. The percentage of any unused nil rate band can be transferred to a surviving spouse or civil partner. Thus, with some simple tax planning, you can potentially double the Nil Rate Band to £650,000. Other reliefs and exemptions can reduce the value of your estate charged at 40%.

One way of doing this is by utilising your residential nil rate band (also known as the “additional threshold”). This relief can increase the value of the estate charged at 0% by £125,000. However, this relief is available subject to certain requirements being met. Speak to one of our estate planning solicitors to find out more.

Lifetime gifts

Another well-known estate planning technique is to make lifetime gifts. This is often referred to as the seven-year rule. Again, care should be taken when making lifetime gifts, as any gifts that are subject to a reservation (such as parents who gift their house to their children but reserve the right to live in it as if it’s their own) will be clawed back into the estate for Inheritance Tax calculation purposes. Further, there are occasions when HMRC can inquire about gifts made beyond the seven-year period. Ideally, both the donor and recipient of the gift should receive independent legal advice before making a gift to reduce Inheritance Tax liability.

Why instruct solicitors?

While creating an online “do it yourself” will is cheaper, a carefully crafted will and good estate planning advice will help you reduce your estate’s Inheritance Tax liability.

Good estate planning will ensure that you fully utilise the many other Inheritance Tax exemptions and reliefs available to you, which are not covered by this note due to their number.

Further, professional advice will reduce the risk of creating an invalid will, which does not fully comply with the requirements of the Wills Act 1837. A non-compliant will results in the whole estate being distributed under the Intestacy Rules. Similarly, a partial intestacy can also be created with a poorly drafted will. This means that some assets will pass under the will, and the remaining assets will pass under the Intestacy Rules.

Finally, there has recently been an increase in the number of claims made against an estate under the Inheritance (Provision for Family and Dependants) Act 1975. Individuals can claim under this act when they believe the Intestacy Rules or the will has not made a reasonable financial provision for them. It is important to consider this when making a will in an attempt to mitigate potential claims.

For more information, contact James McMullan today.

Note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Why is clear contract drafting important?
    How simple contract clauses can protect your business.


    Read more
  • Ensuring equality: A legal guide to responsibilities and compliance
    Understanding equal opportunities in the workplace


    Read more
  • Navigating the Economic Crime and Corporate Transparency Act 2023: What it means for your business
    The Economic Crime and Corporate Transparency Act 2023 (the Act) represents a significant shift in the UK's approach to combating economic crime, improving corporate transparency, and anti-mo


    Read more
  • Blowing kisses, not boundaries
    Tribunal clears air on workplace etiquette.


    Read more
  • Estate planning: How not to make mincemeat of it!
    The High Court has confirmed that a will handwritten on the back of two cardboard food packages is legally binding.


    Read more

What they say...

  • Leann Paris, March 2025
    “From the beginning to the end, the support we have received throughout the case with all the staff members has been far more than we expected, we got kept up to date with every single matter, I have had stressful few years but Charlotte and he

  • C Smith, March 2025
    “As executor of a will it was a relief for a solicitor to act on my behalf as though no disputes it was still a lengthy and complex process. It was dealt with mostly by Charlotte B. who kept me informed at all times. She explained the process c

  • Marc, March 2025
    “RIAA Barker Gillette were engaged to handle a real estate transaction with unusual circumstances. As a non-UK resident unfamiliar with English conveyancing procedures, I felt completely satisfied with the depth of the information and explanati

  • Leigh, March 2025
    “Instructed Martin on my first property purchase. He was a delight to work with, kept me informed and updated regularly. It was an incredibly smooth and quick process. Couldn’t be happier.”

  • Ms Brownell, March 2025
    “Patrick was amazing from start to finish. He made the process so easy, and explained each step in detail ahead of time so I’d understand what would happen and when. He was incredibly organized and noted every detail, calling out things t

Read more
Send this to a friend