Make Sure You Know Who Gets What; PERSONAL FINANCE
Byline: TREVOR LAW
It is often said the best inheritance a parent can give children is a few minutes of their time.
It might equally be said nowadays the best inheritance one can leave is a will. Half of all Britons have not made a will. It is reckoned only one in five parents have. This could lead to all sorts of complications on death, not least your inheritance not going where you intended.
It could also lead to family disputes, legal action or the estate having to pay inheritance tax.
It is commonly thought on death your estate will pass to your surviving spouse if there is no will. Many people living with long-term partners also believe their "common law" wife or husband has the same rights of inheritance.
These misconceptions could leave the surviving spouse or partner in severe difficulty.
The law sets out hard-and-fast rules for what happens if you die without a will. Passing away without a will is known in legal parlance as dying intestate and the rules that govern the distribution of the estate in such circumstances are known as the law of intestacy.
Under the Administration of Estates Act 1925 the spouse and children do not automatically receive everything in the deceased's estate.
There is a strict order under the Act for deciding who gets what.
If you leave a spouse but no children, your spouse will receive the first pounds 200,000 of the estate and half the balance. The remainder would go firstly to surviving parents. If there are none, it will be distributed to your brothers and sisters and so on to your extended blood relatives. This could mean the brother with the annoying wife and kids to whom you haven't spoken for years could end up with a chunk.
The situation is even more complicated if there are children. In these circumstances the surviving spouse receives the first pounds 125,000 and an income from half the balance. This balance passes to the children at 18.
This could lead to the children receiving a substantial sum at an age when most parents would feel they would be unable to deal with it sensibly. Most will stipulate ages of 21 or 25 before children receive large inheritances.
If the family home is in the deceased's sole name, it may have to be sold to provide the legacies demanded by intestacy laws. This may have to be done as well if inheritance tax becomes an issue. Only the surviving spouse has an exemption. Children or others receiving assets under intestacy may be liable to 40 per cent inheritance tax, again forcing a sale.
The spouse can apply to the courts for a greater share of the estate, but basically this leads to a situation where a parent is suing their children, not ideal for family harmony. …