The Law of Unforeseen Consequences

Guest Blog by Derek Cook, Senior Probate Practitioner at Lanyon Bowdler

As was recently reported, the comedian Rik Mayall died without leaving a Will; this means he died’ intestate’. There are rules about intestacy – when you die without a Will – and these were amended as recently as October 2014. If the deceased was married, the spouse now receives up to £250,000 and one half of any amount above this. The children receive the other half between them. There has been some debate about this, as it can be perceived as giving too much to the spouse.

If the amount received by the children is above the tax-free allowance of £325,000 then inheritance tax will be paid at 40% on anything above the threshold. If the Will had left the whole estate to the spouse, then no tax would have been paid. The spouse would then be free to make arrangements to mitigate tax on their own death, using both tax free amounts, totalling £650,000, and perhaps by making lifetime gifts to lower the capital.

Depending on the ages of the children, it might be possible to do a Deed of Variation to lower the tax liability. However, the Government has announced a review into Deeds of Variation after the General Election, so if not banned, then opportunities will almost certainly be curtailed in future.  The effectiveness of Deeds of Variation must, therefore, not be relied upon in future.

If Rik Mayall had made a Will, then speculation about Inheritance Tax due in his estate would not have arisen. It is not only those with ‘large’ estates who should heed this timely reminder. Those with smaller estates and perhaps divorced, with children from different marriages, can be affected by the intestacy rules too. This is the law of unforeseen consequences, so making a Will is just old fashioned common sense.

One final point is that gifts to registered charities are free of Inheritance Tax.

If you’d like to make a Will, please come along to our Will Writing Day at The Courtyard on Saturday 3rd October from 10am – 4pm. To book your half-hour appointment with a legal specialist please contact Melanie Denning on 01432 346503 or email melanie.denning@courtyard.org.uk. The Courtyard (registered charity no. 1067869) will be accepting donations in exchange for a Will writing service (£60 for a Will/ £30 Codicil).