It can be difficult to find the time to make a Will, even though it’s something you intend to get round to. However good those intentions, if you were to die without a Will, it’s unlikely your money and estate will be distributed in the way you wanted.
The greater your estate, or the more complex your wishes or family circumstances, the greater the risk that your hard-earned wealth will not achieve the outcome you hoped for. The example below demonstrates why.
This is a particular challenge for innovators and entrepreneurs, who are typically time-poor and often have their personal assets tied up in their developing business, making their estate more complex. Without a Will your business and personal assets will be hard to unravel, prolonging the time before your loved ones can benefit – assuming they will benefit at all.
The example below shows just how difficult it can be to resolve.
The situation
Mr Smith was father to three adult children from his first marriage and two toddlers from his second marriage. Unfortunately, his adult children did not get on well with their step-mother. Mr Smith’s estate (net of inheritance tax) comprised the house worth £800,000 in his sole name, £80,000 in bank accounts and premium bonds worth £50,000.
Mr Smith died without making a Will, as he assumed all his assets would go automatically to his wife.
An unwelcome dilemma
As he did not have a Will, Mr Smith’s estate will be governed by the intestacy rules. This means his wife will receive his personal belongings and half the rest of the estate: a lump sum of £250,000. The other half will be divided between the five children. The money for the children under 18 will go into trust, whilst the adult children will receive theirs outright.
Mr Smith’s house might therefore need to be sold and the money distributed accordingly:
• Wife – £250,000 plus £340,000 (£590,000 in total)
• Three adult children – £68,000 each
• Two minor children – £68,000 each, held in trust until they are 18
From her share, his wife will need to provide a home for herself and the two young children. She won’t have access to her children’s money, as it will be held in trust until they reach 18. Would that have been Mr Smith’s wish? He might have thought 18 was too young to inherit.
The adult children could redirect their inheritance to their step-mother, but that’s unlikely given that they don’t get on well. His wife might be able to bring a claim against Mr Smith’s estate on the basis that reasonable financial provision was not made for her, but this would be a time-consuming and expensive process.
A problem you can avoid
If only he’d made a Will, Mr Smith could have ensured his wishes were carried out simply and tax efficiently.
Although it was too late for Mr Smith, it needn’t be too late for your loved ones, talk to a qualified person and get a will made.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. [1]
[1] Reproduced from Mondaq of an article by Fiona Lewsey of Taylor Vintners