A Last Will & Testament is arguably one of the the most important documents in your life. Yet, over 50% of UK adults still do not have a Last Will & Testament. Astonishingly, one in eight people, state that they have no intention of writing a Last Will & Testament.
Today we are going to demonstrate two examples, of the harsh reality of not taking advice, and not having a valid Last Will & Testament in place.
Example 1
Husband & wife, with 3 children. Two of the children are under the age of 18, and one is over the age of 18.
Husband passes away suddenly, and has no valid Last Will & Testament in place. Husband had a £400k life policy, and his wife had recently found out that she did not own the property alongside her late husband (property value £450k), and was owned solely by her husband.
Given that the husband had no Last Will & Testament, he is now classed as having passed away in intestacy. The laws of intestacy are as follows.
- Wife / Civil Partner all personal possessions and property.
- Wife / Civil Partner the first £322k of the estate.
- Wife / Civil Partner half of the remaining estate.
- The children to inherit the other half (shared between them, equally).
What does this mean for the wife?
The wife now has to go through a costly probate process to obtain letters of administration. The breakdown of the inheritance was agreed as follows:
- £322k life policy inherited by the wife.
- £78k life policy inherited by the children.
- 59% (£264k in todays terms) of the property inherited by the wife.
- 41% (£186k in todays terms) of the property inherited by the children.
Given that the children are inheriting, all of the husband’s RNRB (Residents Nil Rate Band), along with £89k of his NRB are utilised for IHT (Inheritance Tax) purposes. This now leaves the wife only able to utilise £236k of her late husband’s Nil Rate Bands upon her passing. Giving her a total of £736k in Nil Rate Band for IHT purposes, as opposed to £1m (assuming she does not re-marry).
Trusts are required for the property, as there are minor children inheriting, and the wife wants the property safeguarded from any divorce, bankrupty, etc that the children could encounter later in life.
Total legal fees for this process from start to finish of £6,500.00!! This does not include any fees for investment advice for the trustees to invest the liquid funds that are not for immediate distribution, under the Trustee Act 2000.
A Will passing the husband’s estate to the surviving spouse (possibly adding in some trust planning to protect the main residence from sideways disinheritance, care fees, etc), and taking advice to write the life policy into trust would have saved a lot of time, money and hassle for the family.
Example 2
Husband & wife, with children from previous relationships.
Husband has 2 children, and wife has 3 children.
The couple reside at a property solely owned by the wife, and the husband rents out his previous main residence. Wife passes away, having no valid Last Will & Testament in place.
The property of the wife is valued at £150k, and she has £100k in savings.
Given that the wife has no Last Will & Testament, she is now classed as having passed away in intestacy, and the laws of intestacy detailed in example 1 apply.
What does this mean for the wife’s children?
The wife has now totally disinherited her own children (sideways disinheritance), as her husband now inherits 100% of her estate. The reason for this, is that the wife’s total estate is valued at £250k, which falls within the first £322k being inherited by the husband / civil partner.
A Will including some trust planning around the property, and residual estate, would have ensured that the deceased did not disinherit her children, whilst also allowing the husband to still live at the property, if he so wished.
To conclude………..”The Value Advice” is priceless to protect your loved ones.
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