Without a Will your wishes are unknown and you leave your testamentary wishes to chance. This could mean your assets going to the wrong people, the wrong guardians for your children and/or your loved ones trapped in expensive legal disputes.
Although it may seem like something you can put off, estate planning is one of the most important things you can do to leave a legacy, rather than a liability, for your loved ones.
1. The Intestacy Rules
If you die without a valid Will, called “dying Intestate”, your estate will be distributed according to the Intestacy Rules. These rules were written in 1925 so, as you might imagine, are somewhat outdated. They can leave people you would like to have inherited without any provision.
Who inherits under these Rules depends on what family you leave behind, where you lived and the value of your estate. The Intestacy Rules that apply in England and Wales are shown below.
Under intestacy, married and civil partners are in pole position to inherit. However, if you are co-habiting, you will not inherit under these rules. The myth of common law spouses is just that: a myth.
2. What about the kids?
If you have children or dependants, it’s even more important that you make a valid Will early and plan for their future. Perhaps most importantly, your Will should appoint guardians to look after your children should their parents die. If you do not specify guardians in a valid Will, the court will decide who will bring up your minor children.
You might see your stepchildren and foster children as the same as your own natural children but they are excluded from inheriting under the Intestacy Rules. Instead they would be forced to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975, incurring significant stress, time and cost. The best way to provide for them is to name them as beneficiaries in your Will.
3. Jointly owned property?
Any jointly owned property will go to the surviving joint-owner upon death of the other joint-owner. This is the typical situation for couples owning a house together. If you own your home as joint tenants with your partner, they will automatically inherit your share of the property on your death. Therefore it does not need to go through the Intestacy Rules.
If you want anything else to happen to your share of property, including having it protected in trust, you will need to put in place the appropriate planning.
4. Wasting your legacy
Former Labour Chancellor Roy Jenkins famously described Inheritance Tax (IHT) as “a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.” Although this might be overstating it, proper estate planning can certainly mitigate IHT, leaving more for your preferred beneficiaries.
There are other risks that can erode the wealth you can pass on, such as care fees and legal disputes, but appropriate planning can mitigate these too.
So, whilst you might feel too busy living to plan for death, spare a thought for those you leave behind and choose to leave a legacy, not a liability.
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