Inheritance matters

Dying without a will Back to top

If you die without making a will, the law says who will inherit your estate. The law favours a husband, wife or civil partner and your children (including adopted children but not step-children). What you leave may be split between your spouse or civil partner and children.

An unmarried partner has no legal right to inherit anything, but may be able to apply to a court for financial support from your estate.

If you don’t have a husband, wife, civil partner or children, your estate goes to more distant relatives. If there are no relatives, the state gets everything and this may not be the way you would like to leave your money and possessions.

Children and wills Back to top

You have to be aged at least 18 (16 in Scotland) to make a will. This means the law dictates how a child’s estate is passed on. Normally, the parents will inherit everything (or the young person’s husband, wife or civil partner if he or she was married). The child’s estate may include money a child has invested in a Child Trust Fund.

Making a will Back to top

Writing a will means you can ensure that the right people inherit from you and that your beneficiaries don’t suffer unnecessary hardship. You can also use a will to arrange your affairs tax efficiently (see below), appoint people called executors to sort out your estate and, if appropriate, appoint guardians to take care of your children.

You can write your own will, but unless your affairs are very straightforward, it’s safer to use a solicitor. The fee for writing a will starts at about £85. A complicated one will cost more.

Financial help through the legal aid system isn’t normally available for writing a will, but it is occasionally in special circumstances. The solicitor you use can tell you if you qualify for legal aid.

If you’re a member of a union, you may be able to get a free or reduced cost will written through their union legal services. 

Macmillan’s discounted will-writing service| provides access to legal professionals you can trust and saves you money when writing your will. There is no obligation to leave a gift to Macmillan in your will to use the service but we hope you will consider this. The partner organisations offer a range of options for writing your will, over the phone, face to face or online, and a range of different prices.

 

Jointly-owned possessions Back to top

There are two ways you can own something jointly with one or more other people. You can own it as:

• Joint tenants (or with a ‘survivorship destination’ in Scotland) Legally, you all have equal shares in the asset and, when one of you dies, the rest inherit the deceased person’s share. For example, if you’re a couple (married or not) and own your home as joint tenants, you each have a half share. When one of you dies, the other automatically inherits their share. This overrides what the law or any will says about inheritance.
• Tenants in common (or ‘common owned’ in Scotland) You can have unequal shares and, when one of you dies, your share is passed on either in accordance with your will or as the law says if there is no will.

Joint bank and savings accounts are always owned as joint tenants. A simple way to ensure that your partner would have immediate access to cash for day-to-day living if you died is to transfer some money into a joint account now.

Tax planning Back to top

There may be inheritance tax to pay on an estate. But everyone has a tax-free allowance of £325,00 (this amount is frozen until April 2015). If your estate and any taxable gifts made in the last seven years (see below) are worth less than £325,000, there is no tax on it at all. There is also no tax on anything you leave to:

• your husband, wife or civil partner (in most cases)
• charities (in most cases).

Married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies to as much as £650,000. Their executors or personal representatives must transfer the first spouse or civil partner’s unused inheritance tax threshold or ‘nil rate band’ to the second spouse or civil partner when they die.

If your estate is worth more than £325,000, you may want to look at ways you can make gifts in your lifetime and arrange your will in order to reduce any tax bill.

Lifetime gifts Back to top

Making lifetime gifts can reduce the value of your estate when you die, which reduces the inheritance tax on it. Lifetime gifts that are tax-free include:

• gifts to your husband, wife or civil partner (in most cases)
• gifts to charity
• wedding gifts up to specified limits
• regular gifts of any amount out of your income that don’t reduce your standard of living
• any number of small gifts up to £250 per person
• up to £3,000 of any other gifts you make each tax year.

The seven-year rule

Most other gifts you make are tax-free only if you survive for seven years after making them. If you die before seven years are up, they count as taxable gifts. Some gifts (in particular, gifts to most types of trust) are taxable anyway.

When you die, your tax-free allowance (£325,000) is set first against the taxable gifts you have made in the last seven years. The remainder is set against your estate. For example, if you left an estate worth £300,000 and had made taxable gifts of £100,000 during the last seven years, the gifts would use up £100,000 of the allowance, leaving £225,000 to set against your estate. This means £75,000 of the estate would be taxed.

Making gifts to a charity out of your estate can reduce the rate at which it is taxed. For more information, download the HMRC's fact sheet| or visit hmrc.gov.uk/inheritancetax|
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