The comfort in preparing a lasting power of attorney
The misconception that married couples do not need a will
There is often a misconception with married couples that wills are not needed as everything will pass to the surviving spouse on the first death. This is not strictly speaking correct. If you die without a will, your estate passes under the rules of intestacy which stipulate how your estate is distributed.
If you die married with children, your spouse will receive all of your personal possessions and a statutory legacy of £250,000. The remainder of your estate will be divided as to one half for your surviving spouse and one half for your children at the age of 18. This can have adverse Inheritance Tax (IHT) consequences as your spouse is treated as exempt for IHT purposes but your children are not. Therefore if the value of your estate passing to your children exceeds the prevailing IHT allowances it would be subject to an immediate IHT charge at 40%.
The position is made somewhat more worrying with the survivorship rules. If you make a will, it is usual nowadays not to include a clause which stipulates that your spouse must survive you for a period of 30 days. This would cover a situation where you and your spouse die together or in quick succession and the reason for it no longer being used is that it can also have adverse IHT consequences.
The rules of intestacy do impose a 30 day survivorship period. Therefore if the first spouse to die has an estate that exceeds the IHT allowances available there will be tax to pay on the first death. If the survivor then died with an estate below the IHT allowances available to them they would waste any allowance they didn’t use. As an alternative, if Wills were made leaving everything to the survivor then the whole estate on the first death would be free of IHT (spouse exempt) and all allowances would be available on the survivor’s death thus using all allowances available and reducing the IHT payable.
The above is a short reminder of the importance of preparing wills for IHT planning purposes and to ensure that your estate passes in accordance with your wishes. For more information about wills, please contact Amy Lane or another member of the Private Client team.
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