Chancellor Jeremy Hunt has rejected calls to reduce inheritance tax in his autumn statement. Instead, he has decided to leave rates and allowances at the same level as they have been for the last three years. Inheritance tax is set at 40% and becomes payable once the tax-free threshold of £325,000 has been passed. There
The Importance of Making a Will
It is very important to make a will. If you die without one, the way your money, property or possessions are distributed may not be what you would have wished.
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These are some of the main reasons for making a will:
You can choose who will receive your estate
If you die without a will your estate will pass under the intestacy rules, which set out the order of priority among your relatives in terms of who will receive your assets. These rules mean that your closest relatives will have priority, which may not be what you want. Most importantly, if you are in a cohabiting relationship with someone (and you are not married or in a civil partnership with them), they will not receive anything under the intestacy rules.
You can choose who will be responsible for dealing with your estate
If you die without a will, you have died ‘intestate’. The people who are responsible for administering the estate (i.e. identifying your assets and liabilities, completing the tax forms, obtaining a Grant of Representation and then dealing with the estate) are nominated according to an order of priority set out by law. This means that the job could fall automatically to someone who might not be suitable. Administering your estate is an important duty, and it is far better to be able to choose who carries it out. Some people choose a solicitor in their Will to deal with their estate, which has a number of advantages.
You can choose who will be your children’s guardians
For anyone with children, this is extremely important. If you haven’t named guardians in your will, the decision about who will care for your children could end up being made by a court.
You may save considerable time and money with the administration
Where a person has died without a will, the time and expense involved in dealing with the estate tend to increase. In particular, it can take a long time to track down the beneficiaries (the people who are entitled to your estate), and it may be necessary to employ tracing agents. This all adds to the cost, and will therefore reduce the size of the estate and the amount of money that your loved ones will receive.
You may avoid family disputes
As mentioned above, without a will your estate will be divided up and distributed according to the intestacy rules. The distribution is based on how closely they are related to you, with no weight given to the quality of the relationship you had with them. As a result, a relative who you haven’t spoken to for years may receive the same amount as a relative who has helped to care for you on a daily basis. Situations like this can cause friction between family members, and can easily be avoided by preparing a simple will.
You may be able to avoid or reduce inheritance tax
There are a number of ways in which a will can help you avoid or reduce the amount of inheritance tax payable when you die. If you have a large estate this is a particularly important issue, but even if you think you don’t fall within that category, rising property prices are pushing many people into having potentially taxable estates.