Inheritance Tax Laws – Someone Dies Intestate
There are many laws in the UK which you can be completely ignorant with no real problem or issue until they impact on you. Then, these laws which previously meant nothing to you can suddenly become the most important thing in your life i.e inheritance tax laws. If someone you know has passed away, it can be a very difficult time, especially if they pass away unexpectedly. This may lead to a situation where the person who has passed away has not created a will.
The term for dying without creating a will is to "die intestate" and there is set laws in place when this happens. The Administration of Estates Act comes into place and the intestacy rules indicate that the deceased's property and estate will be divided up by known rules. However, these rules can be complex and they are very much dependent on the state and structure of the family of the person.
Married with a child
If you pass away while you are married or involved in a civil relationship while having children, there is a simple process. The first £250,000 of everything you own will be directed straight to your partner. If you own less than this value, they will receive everything you leave behind. If you have more than this to leave behind, the remaining property and value above the £250,000 while be divided into two. The first half of the remaining amount will be put into trust to be handed over to your children when they reach the age of 18. The second half of the remaining funds will be provided to your partner as a "lifetime interest". This creates a situation where your partner is not able to withdraw or gain access to this amount but they can derive an income from it. An example would be if they received interest while the money was placed in a savings account. Upon the death of the partner, the value will be distributed to your children.
Married without a child
If you pass away while you are married or involved in a civil relationship without having children, there is also a simple process. The first £450,000 of everything you own will be directed straight to your partner. If you own less than this value, they will receive everything you leave behind. If you have more than this to leave behind, the remaining property and value above the £450,000 while be divided into two. The first half of the remaining amount will be given to your partner while the second half will be given to your parents. If your parents are no longer living, the money will be transferred to any brothers or sisters that you may or the children of your brothers and sisters.
If you pass away while you are married or involved in a civil relationship without having children or any living relatives, the entire estate that you leave behind will be directed towards your partner.
If you are not married or involved in a civil relationship but have children, your estate will be provided to your children once they reach the age of 18.
No marriage and no children
If you are not married or involved in a civil relationship and have no children, your estate will be distributed in the following order. The initial transfer of your estate would be to your parents but if they are no longer with us, your estate would be transferred to any brothers and sisters that you have. If you have no brothers or sisters, there would be a transfer to any grandparents that you have.
If your grandparents have passed away, any estate that you leave behind would be transferred to aunties and uncles. If you have no one left to leave your estate to, meaning that you have no relatives or partner and you will die without creating a will, your estate will be transferred to the crown.
Given that most people would be annoyed at this outcome, it makes sense to create a will and at least direct your estate towards a charity if you do not have any family.
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Article looks at Inheritance Tax Law