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T83 - What happens when we die? – Part 1

(This article appeared in The June 2010 issue of "The Probe" 

I am not referring here to the more philosophical question, concerning bright lights, tunnels and long dead ancestors. No, this is far more interesting. I am referring to what actually happens when you check out.

 This month we consider the position if you have made a Will and whether this can be altered and also briefly consider what happens if you don’t make a Will. Next month, we look in more detail at the transfer of the Nil Rate Band.

 You have made a valid will

 Your estate is sorted out by the executors, whom you would have named in your Will. You would also have left instructions of your personal wishes as to who gets what and perhaps other details like who looks after your family. The executors will pay off any debts and after paying inheritance tax (IHT) will distribute the assets as per your wishes. If you leave anything to minors (the small human variety as opposed to men in yellow helmets who work underground) these assets will be left in the care of guardians until they turn 18.

 If you have made a Will, it comes into force the day you die unless you have revoked it by destroying it, making a new Will or getting married (which automatically revokes a will unless you stated in your will that it was made in anticipation of marriage). Interestingly, divorce does not revoke a will though it does cancel any benefit to a former spouse* unless the Will states divorce should not affect it. It also cancels the appointment of an ex-spouse* as an executor.

 So, is it possible to change a Will once the person who made it dies?

 Yes!

 1.      Disclaimers – If you inherit something, but you decide you don’t want it – you can disclaim it in writing stating that it should have effect for IHT as if it had never been left to you, within 2 years of death, but this can’t be for any consideration (payment). This will then pass to whoever would have been entitled to the residue of the estate.

2.      Deed of Variation – This is often used where someone makes a tax-inefficient Will. All the beneficiaries of the original Will must sign the deed which states the variations and also states that it is to have effect for IHT as if the deceased had made the Will in its amended form. Again, it must be within 2 years of death.

 You have not made a Will

 If you do not make a Will, your estate is distributed under the rules of intestacy. These depend on where you are domiciled so if you are Scottish or Northern Irish domiciled, they will be a little different. In this article, we assume you are UK domiciled.

 1.      If you have a spouse* but no other family – everything passes to the spouse*.

2.      If you have children but no spouse* - everything passes to the children.

3.      If you have a spouse* and children – the spouse* gets £250,000 plus a life interest in half of the rest. The children get the other half absolutely and the balance of the first half when the spouse* passes away.

4.      If you have a spouse* but no children, but you have other family (parents and siblings etc) – the spouse* gets £450,000 and half of the rest absolutely. The other half goes to parents, or siblings if no parents etc.

5.      If you have no relatives – everything goes to the Crown! Lucky them!

 (*Spouse also refers to Civil partners) 

  

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