It’s not the easiest of conversations to have, and for most of the population it’s too difficult to have.
What happens to your possessions after you die. At the moment, around two thirds of adults in the UK don’t have a will, and queries about intestacy (dying without a will) have doubled in the last five years, according to Citizens Advice.
Celebrity Prince died without making a will, and a bank had to be brought in to manage the division of his assets, worth hundreds of millions of pounds.
Coping with the death of a loved one is hard enough, but then having to deal with finances on top of that is stress and hassle that could easily be avoided.
Dying without a will means that the state decides how your possessions are to be split up, not you. For example, if you have assets worth less than £250,000 and you are married, then your spouse gets everything. Even if you have children, they wouldn’t be entitled to anything. Can you imagine how many arguments or family grievances this could cause? Or another example, if you aren’t married to your partner, you have no right to inherit anything without a partner, even if you have children together.
It can take years to sort out, cost thousands of pounds and mean that some people you may not even have met, or no longer have a relationship with having a claim on your assets.
Plus, it could also leave your family with an inheritance tax bill running into the thousands.
How do you know if you are liable to pay inheritance tax? Essentially, if you have assets (including the value of your house) worth over £325,000, then you will be taxed for the amount above this level, at 40%. As the average house price in the South East is £375,000 and £580,000 in London, your house alone will tip you over this threshold – there is of course the Main Residence Nil Rate Band that is starting in April 2017 and being phased in through to 2021, that will reduce any inheritance tax on your main home.
However, by having a will and simply leaving your house to your spouse will exempt any inheritance tax to be paid. But of course, that’s just one instance, and if you have children, then it makes it a lot more complicated. Essentially, taking some time now to work out how you want your assets to be passed on could save lot of money, financial headaches for your loved ones, and potential family arguments.
Of course, it’s wise to involve your family in what you are planning to do, and this is where the difficulties come in talking about a situation which isn’t nice to think about.
Our advice? Seek professional help first, to determine what is the best way of arranging your assets, perhaps even draw up a draft will, so you are clear what you are planning and why this is the best option and then plan your conversation with the family. The Money Advice Service (www.moneyadviceservice.org.uk) has some really good advice on how to handle this conversation, what you should bring, and how you should act on any feedback from your family.
It’s not easy talking about death, but the consequences of not having this conversation now could leave your family in severe dire financial consequences. So make this a resolution for 2017, make a will and be reassured that your family will be looked after should the worst happen to you.