A prominent illustration of the dangers of dying without making a will has been made by Rik Mayall recently.
His estate is estimated to be about £1.2 million. He died aged 56 survived by his wife and three adult children.
If he had left a will bequeathing everything to his wife then his estate would be exempt from inheritance tax (currently levied at 40% above the personal allowance of £325,000). He could also have allowed for tax planning in any will to minimise or avoid tax.
But he didn’t and so the current position under the new Inheritance and Trustees Power Act 2014 is that his wife will get all his ‘personal chattels’, a statutory legacy of £250,000 and 50% of the remainder. His three children would get the other 50% of the remainder. Given the value of the estate it is very likely his children would inherit more than £325,000 and would therefore have to pay 40% of everything over this amount.
This shows that even the rich and famous can fall foul. Whilst most people will not have estates of similar size, the reality is that your estate will have at least one property and given the current house prices, that property will be worth more than the personal allowance of £325,000. So in order to save your intended beneficiaries a hefty tax bill, it is always advisable to plan in advance and get proper advice and a will drawn up before it’s too late.