Managing trusts and tax

Property and tax issues if you die without a will

Mr X died in 2016.  At his death, he and his wife owned a number of properties (both residential and commercial), some of which were in his sole name and others of which were in joint names.  Mr and Mrs X had a son and one of the properties was co-owned by Mr X and the son.  Mr X also owned a number of other bank accounts and investments as well.  The total value of his estate was around £4 million.

Mr X never made a will which meant that when he died, he had no control over what happened to his estate.  Instead, the Intestacy Rules applied to the estate and the result was that the assets had to be split between the surviving wife and the son.  This created a huge problem as, while the assets passing to the wife were exempt from Inheritance Tax, the assets passing to the son were not.  The result was a large liability to tax which could otherwise have been avoided.

Fortunately, Mrs X and the son were able to agree to a post-death variation which redirected the estate to the wife so that no tax fell due, but this would not have been possible if they had disagreed or if they had missed the deadline for doing so.   Ideally, Mr X should have made a will leaving his estate to his wife outright so that all of his assets would have benefitted from spouse exemption, and there would have been no tax to pay in his estate (and no need to worry about post-death time limits either).  Making a will would also have allowed some planning to be carried out in relation to the commercial assets, some of which also benefitted from a separate inheritance tax relief as well.

Mrs X should also have had her own will prepared so that when she dies, her estate can be dealt with according to her instructions.  Both Mr & Mrs X should also have had Lasting Powers of Attorney prepared as well to enable their affairs to be dealt with by their chosen attorneys if either of them became mentally or physically incapacitated.

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