No will? Couples and step-families may lose out!
Inheritance tax rules have recently changed to increase the amount that can be passed to family members tax-free. This is of no benefit to unmarried couples or those with step-children* if they have not made a will!
From 6 April, estates worth £425,000 or more, instead of £325,000, are subject to 40% inheritance tax, and with married couples/civil partners able to inherit each other’s tax-free allowance, it means up to £850,000 can now be passed onto descendants tax-free. This will rise to a maximum of £1million in 2020.
Only 47%** of British parents with children have made a will! If you are one of the 53% that hasn't, it will be left to follow the Rules of Intestacy which lists specifically who can benefit from your estate. Excluded from this list are cohabitants, unmarried partners, common-law spouses, step-children and step-parents.
For over 20 years*** cohabiting couple families have been the fastest growing family type, more than doubling from 1.5m in 1996 to 3.3m in 2016. One in three people in the UK**** is now a step-child, step-sibling or step-parent. None will be given priority if a will isn’t written.
Not leaving a will causes distress and heartache for those left behind and this is made worse for the growing number of people who will find themselves unable to inherit the estate as they are excluded from the Intestacy list. Even the Crown takes priority over cohabiting couples and step-families, meaning your estate could end up in the monarchy’s coffers!
If you want your loved-ones rather than the Treasury to take control of your estate you should make a will and have plans in place to meet your future financial goals; this will help you accrue assets to pass onto the next generation.
Rules of Intestacy (those who could benefit from the estate, dependent on family circumstances)
· Spouse/civil partner
· Other close relatives – nieces/nephews/cousins
· In the absence of a surviving relative, the estate goes to the Crown, known as Bono Vacantia.
Rules of Intestacy exclusions
· Cohabitants /unmarried partners
· Common-law spouses/ex-spouses
· Step-parents, step-children
· Close friends/carers
*unless legally adopted by the deceased
****February 2014 Aviva Family Finance Report
The Financial Conduct Authority does not regulate tax advice or will writing.