The tricky politics of inheritance – who should you leave your money to?
In a recent article in The Telegraph Magazine, Private Wealth Partner, Mark Lindley provides some commentary on how leaving very little paperwork upon death, can open up a whole quagmire of unknowns.
“When a husband, wife or civil partner inherits from their spouse, there is no inheritance tax due. Thereafter, their children also might not pay inheritance tax because the nil band rate (tax-free threshold) is currently £325,000 per person. So, parents can potentially leave their estates with a combined value of up to £650,000 to their children without any inheritance tax being due. Obviously, if the estate exceeds that amount, then inheritance tax is payable on that additional value. If parents are considering gifting property or money before death, as in Georgia’s case, then the value of the gift does not escape inheritance tax immediately. If the parent making the gift dies within seven years, then the value of the gift will be brought back into account for tax purposes. If parents survive for seven years after the initial date of the gift, there should be no tax to pay on the gift. Helpfully, the amount of tax payable also starts to reduce after three years, with an increasing reduction every year after that.”
Inheritance can be a quagmire of complexity, and while you can buy basic legal wills from the post office or organisations like Citizens Advice, if your estate is anything more complicated than a single home, you will probably want to talk to the experts. A particular safeguard Mark feels strongly about is Lasting Power of Attorney (you appoint someone to manage your affairs if you lose capacity). “Sometimes these can be abused, of course. There was a famous case where someone was given Lasting Power of Attorney and unwisely invested a large amount of their aunt’s money in an unsuccessful reptile-breeding business. But, on the whole, these documents are a very good idea. If you put one in place and you don’t need it, fine; but if you haven’t got it and you lose your mental capacity, all kinds of problems can ensue,” he says.
At the other end of the scale, when people die intestate (no will), the aftermath can be disastrous. Amy Winehouse, Robin Williams and Prince are some of the many celebrities whose sudden deaths meant nothing was made legal. “In an intestacy, the law says that a surviving spouse and any children will usually inherit the estate between them,” says Mark Lindley. “This may work well with straightforward, relatively small estates, but obviously for the larger estates or more complicated families, including situations with unmarried partners, the intestacy rules are unlikely to be satisfactory. It also means there is a chance that no thought has been given to the care of younger children. Thinking about who steps into your empty parenting shoes is a life-changing decision.”
The full article published on 6 December 2021 can be found here and sits behind a paywall.