Aretha Franklin dies without a Will

Aretha Franklin, the “Queen of Soul”, died intestate, leaving a fortune estimated at $80 million (£62.4 million).

In addition to Aretha Franklin, a list of celebrities who have also died intestate, include:

• Rik Mayall;
• Amy Winehouse;
• Michael Jackson;
• Bob Marley;
• Pablo Piccasso;
• Jimi Hendrix.

There are approximately 30 million adults in the UK, who do not have a Will (and many more who need to review their Wills, as they have had major changes to their circumstances, or are affected by tax changes).

Of the 30 million without Wills:

• 54% have children;
• 64% are unmarried couples.

Many people believe that if you die without a Will, your closest relatives will decide how assets are split. This is not the case. There are rigid rules covering who will receive the assets, so be warned.

The sad passing of Aretha Franklin should serve as a wake-up call to anyone without a Will.  Failing to make provision for your loved ones when you die can lead to confusion and heartache.  Your wealth could go to people you did not intend it to go to, depriving those you cared for most.

Here are some answers to some common questions on what happens if you die intestate.

We are married with no children. Will my spouse inherit everything when I die?

Yes. Your surviving spouse will inherit the entire estate. This is beneficial for the spouse, but it eliminates any claims for other relatives, including parents. The same rules apply to civil partnerships.

What happens if we have children?

The surviving spouse would inherit the first £250,000 of the estate, all personal items and half of whatever remains. The other half is inherited by the children and is divided equally between them, although they cannot gain access to the estate until they are 18. This applies to all children of the parent who has died, even if they are the result of previous relationships. It is possible that the share of any Estate that does go to children may be subject to Inheritance Tax.

We are an unmarried couple living together, with children. What happens when one of us dies?

The term “common-law partner” has no legal standing. This means that the surviving partner does not inherit anything. It is extremely important for couples in this position to make Wills. Under the intestacy rules, the deceased person’s Estate would be shared equally between the children.

What if we don’t have children?

The estate will pass to the deceased person’s parents, if one or both are alive. If the parents are not alive, it would be divided equally between any surviving brothers and sisters, or, failing that, to any half-brothers or half-sisters. The next in line are any grandparents, followed by aunts and uncles, then half-aunts and half-uncles. If there are no surviving relatives in these categories, the Estate passes to the Crown.

If there are no surviving blood relatives, what happens then?

The Estate passes to the Crown. The Crown can grant shares in the Estate to those who can prove that they have an entitlement.

What happens to children if both partners die at the same time?

The custody of children will not go automatically to the relatives or individuals intended, if they have not made their wishes clear in a Will.

Summary

At Ward Williams Financial Services Ltd we believe that having up to date Wills in place is an essential part of Financial Planning. This is to ensure that the Estate is passed to the appropriate beneficiaries, and that children are cared for by chosen guardians.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Inheritance Tax paid to HMRC in the first 4 months of this year was 1.9 billion

Inheritance tax (IHT) as it is understood  today was introduced in 1796 as a levy on the wealthy, but rising property prices and tax thresholds that have not kept pace with inflation mean that the number of estates that fall into the IHT net is ever growing.

A series of exemptions have been introduced to allow families to give away more of their assets tax-free, but the system has so many intricacies that it is causing a great deal of confusion.

The nil-rate band and property allowance

Any inheritance left to a spouse or civil partner is usually tax-free. The amount each person can leave to other heirs tax-free, called the nil-rate band (NRB), has been frozen at £325,000 since 2009. Tax is normally paid at 40 per cent above this threshold. A person who dies and does not use all of their nil-rate band can pass the remainder to their spouse, who will have a larger allowance of assets that they can pass on to heirs. If it had risen with inflation the nil-rate band would now be £414,000.

Those whose estates are worth more than the nil-rate band may be able to use an additional inheritance tax threshold known as the “residential nil-rate band”, which allows an extra £125,000 per person if you are passing on a property that is your main residence to a direct descendant (child or grandchild and their partners). This figure is due to rise to £175,000 over the coming years.

The “residence nil rate band” RNRB , is reduced if your total Estate is valued at greater than £2M, calculating the RNRB is complicated and maximising its effectiveness may require careful planning.

Gifting

You can give away as much money as you like tax-free as long as you live for seven years after making the gift. If you die before then, the recipients could face demands for IHT, depending on the size of your Estate. You are, however, allowed to give away up to £3,000 a year without incurring IHT and you can carry the allowance over for a year. The £3,000 amount has remained unchanged since 1981, if it had risen with inflation it would be about £10,932 today.

There is also a small gifts rule, which allows you to give as many gifts of up to £250 to as many people as you want each tax year.

It is also possible to make regular gifts from income, as long as it does not affect you standard of living.

Pension rules

A quirk in the rules means that if someone transfers their final-salary pension (which you cannot pass on save for a spousal or dependant’s pension) into a money purchase scheme (which you can ordinarily leave in your estate) and dies within two years, the pension pot could be liable to inheritance tax. If the person knew they were in ill health at the time of the transfer, HMRC designates it a ‘chargeable lifetime transfer’ and inheritance tax may apply.

 

Insurance

Many people buy critical illness and life protection together, and often they are placed into a trust. If not placed in Trust any proceeds are likely to increase the Inheritance Tax burden on your Estate.

Summary

At Ward Williams Financial Services Ltd we believe that too much Inheritance tax is paid, and that with professional advice the burden of Inheritance Tax on your Estate can be reduced.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Photo Credit: Terrah Holly

Consultation on Pensions cold calling ban

HMRC has launched a consultation on draft proposals to ban pensions cold calling.

Under the proposals, unsolicited marketing calls relating to pensions could be banned, alongside cold calls that offer a ‘free pension review’.

The government also outlined its intention to ban cold calls that promote retirement income products, such as drawdown.

The consultation closed on 17 August 2018.

Internet link: GOV.UK consultation

 Image by rawpixel.com