What Would You Do?

Posted on September 30, 2008

I am frequently reminded of how dying without an up to date Will can leave families with unnecessary stress, in conflict and financially much worse off.

Angie and Bob had been together for over 20 years when Angie, in her mid 50's, suddenly died. Bob had meet Angie shortly after she had tragically been widowed at a young age. Angie inherited her house from her late husband and raised her two children with Bob as her common law partner. The children, Graeme and Emily, have both left home and are happily married with their own children.

As Angie and Bob never married all of Angie's estate including her £350,000 house is inherited by her children. Bob is left with nothing. Bob at 66 is potentially homeless. Graeme and Emily are aware their Mother wanted Bob to continue to live in the house. However, both children have significant mortgages, Graeme has his own business that is struggling with mounting debts and Emily's eldest daughter Jo is due to go to University in October. Bob has a state pension and few savings. What should they do?

It does not take much to imagine the type of discussions Graeme and Emily will need to have between themselves and with their spouses. Bob's future is in their hands. If only Angie had recorded her wishes then Bob would have no uncertainty and Graeme and Angie would be free of the dilemma that faces them now. How can they achieve what is best for each family and the best for Bob? A decision has to be made.

There is a further complication: Angie's estate is £360,000 and unless documentary evidence is available to confirm that all or part of Angie's late husband's 'nil rate band' tax free entitlement was not used up at the time of his death, £19,200 inheritance tax has to be paid. (40% of £360,000 - £312,000).

This could mean the house has to be sold or money has to be raised in other ways as the £10,000 cash in Angie's estate is not enough to cover the tax due let alone the funeral and other expenses that also have to be met.

Graeme, Emily and Bob would not be facing this torment if Angie had left a Will, whilst had Bob and Angie married and their Wills included an appropriate trust no inheritance tax would need to be paid.

If you are a couple, married or not, without Wills that include a trust then you are likely to leave your loved ones with uncertainty and your home exposed to a possible enforced sale to meet future long term care fees. If you are married and have an estate over £624,000 trusts can enable all inheritance tax to be avoided.

-- Tony Duke: 01525 229644

Source: Focus, October 2008