Inheritance tax otherwise known as IHT, is payable on the estate of someone who has passed away, and is charged at 40 percent on estates above a particular value. However, the tax is just one element of managing the estate of a person who has passed away. While many people will be trying to reduce their tax bill for the loved ones they leave behind, it is of equal importance to lay out one’s final wishes in a formal and binding document.
Jenny Pierce, Director at Solicitors for the Elderly, and Head of Wills, Probate and Trusts at Wards Solicitors spoke to Express.co.uk about the importance of the matter.
She said: “If you don’t have a Will, the state will decide who gets what under the rules of intestacy, which depends on someone’s personal circumstances.
“There is a certain pot luck element to this where what a person wants to happen might or might not happen.
“People tend to assume everything will go to their spouse, but not all of it might, and it depends how they own assets with that person.
“But one of the main issues which can pop up with intestacy is between common law partners, co-habiting, who have kept their assets separate and this can lead to claims against the estate. I’ve even seen people having to sue their children in such circumstances.
“Sometimes it won’t cause an issue and everything can pass from person to person with ease.
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“However, in other circumstances it can be very tricky to deal with, and so having an arrangement in place could save a lot of unnecessary heartache and other issues.”
But Ms Pierce also drew attention to the emotional toll failing to leave a Will could create on loved ones who are left behind to deal with the matter.
She added: “If you have quite a close-knit family structure and a person has not thought about, or taken care with regards to what happens when they are no longer here, it can actually cause real distress for those left behind.
“It can enhance the anger one would naturally feel upon death anyway, and wishing a person had thought about things.
“This is often about smaller stuff like belongings, and tokens, so it is important to sort these issues out too as it could cause arguments.
“There is a very big human element to making sure that you keep a Will, and that you keep it up to date.
“It’s all about peace of mind. If anything is slightly contentious about what a person is choosing to do, then you need to make an arrangement. If you aren’t being even-handed, why not? And think about making sure you include this, and even talk to your beneficiaries ahead of time.
“If people don’t, then it really just leaves behind a huge mess that can be ever so upsetting for people who are left behind.”
However, focusing again on the tax implications which are important for any estate, there are vital considerations to bear in mind.
Ms Pierce commented that in the quest to avoid an unnecessarily hefty tax bill, leaving a Will could be one of the best decisions a person could make.
She said: “Your estate could even end up paying more in tax if you fail to clearly lay out your wishes and what you wish to happen after you pass away.
“To stop this from happening, you should always consider the most tax-efficient ways to do things to ensure you leave what you want, to who you want.
“Think about whether you want flexibility, whether you want to use a trust, whether you want to protect yourself in other ways.”
But most important of all, Ms Pierce stressed, is taking action sooner rather than later on the matter.
The Christmas and New Year period could present the perfect opportunity to speak to family and friends about wishes and desires for after a person passes away, and how an estate could be managed.
While the topic of death is one which not many people wish to broach, tackling the issue head on is likely to reduce complications in the future.
Ms Pierce concluded: “There’s a lot of ‘analysis paralysis’ around. People like to overthink things, and then do not do anything about it.
“But avoid this as much as possible. Just put a simple Will in place, and then with the right help, you can work from there. It may stay simple, or you might want to put more details in, or emphasise a certain area of your assets.
“However, particularly if intestacy is going to do something radically different to what you want, then putting some kind of arrangement in place is vital.
“I would advise speaking to a solicitor, as they will be able to help you clearly lay out your wishes, and address any issues you could face.”