Where there’s a will, it’s (generally) OK.
It’s important to be pragmatic. We learn ‘the facts of life’ early on – but it’s important we learn the facts of death. Because if you thought life was tricky, just wait until you’re faced with death – either you’re own or that of a loved one.
They say only two things in life are certain – death and taxes.
From a legal point of view, the two things are closely linked. When you pass taxes might not bother you, but they may well give those you leave behind a headache. How prepared you are whilst you’re still alive will determine where your estate ends up and how much tax your beneficiaries will pay.
Most people only have a basic Will that passes assets absolutely to their chosen beneficiaries, normally their spouse or partner or, if remarried, their second spouse or partner. It’s very natural to want to provide for the person you loved and shared your life with. There is nothing wrong with it, and a basic Will is much better than having no Will at all.
But a basic Will does not provide much protection and, with ever-changing regulations, it’s important to consider that your personal circumstances, assets, and wealth might have changed change over the years. A properly constructed Will and a regular review of existing Will arrangements and tax planning is a vital part of the future strategy for both you and your family. Fail to do so and you can expose your accumulated wealth to risks you need to be aware of:
- Care costs: where a surviving spouse or partner requires nursing care, the whole estate, including the family home, is susceptible to the cost of that care.
- Marriage after death: when one spouse or partner passes, all the assets become solely owned by the surviving spouse or partner. If the surviving spouse or partner then remarries, half of the inherited estate could be lost in any divorce settlement or, even worse, all of the estates could be lost, disinheriting your children or grandchildren.
- Creditors or bankruptcy: if the surviving spouse or partner was subject to creditor claims or facing bankruptcy then the inherited estate is fully at risk.
- Your business assets: without correct planning, the business may have to be sold and these assets may not be preserved for your family, attracting Inheritance Tax (IHT).
On second death (of your spouse or partner) there are further risks. These get more complex and need a bit of explaining but, if you have an estate of any size – say some property and/or investments – it’s worth seeking advice because:
- If your children/grandchildren/ chosen beneficiaries are subject to divorce proceedings, half of the inheritance is at risk to divorce settlements.
- If you live until you’re 90 your children could well be 60 or even 70. If the inheritance has been passed to them and they are in care, assets could later be assessed for their own care costs.
- If any of your beneficiaries became subject to creditor claims, or bankruptcy, then the inherited estate is fully at risk.
- On second death the remaining estate will be subject to IHT and, if it then passes to the children absolutely, this adds to the children’s estate and could impact on their own Inheritance Tax and so forth down the generations.
With a simple Trust you can ensure that your home, savings, pensions, life assurance, and business assets can be protected for the benefit of future generations whilst protecting them from unnecessary IHT, currently charged at 40%.
Mancini Legal has a dedicated team with a wealth of expertise in this area of family law. We would be delighted to advise you on all issues with regards to Wills, trusts, and IHT.
Click here to find out how we can help you with your probate, estate and trust.