Risks to your family's inheritance

What do we mean by ‘risks to your family’s inheritance’?

In the first instance it could involve losing control over who inherits what. If you have no Will then distribution of your estate would be subject to the Laws of Intestacy, most of which were created in 1925. In particular these laws have a very particular hierarchy for how your estate would be distributed and your family would have no control over that. In the case of under-age children losing both parents, guardianship is not automatic and application to a court could be involved.
For couples who are neither married nor in a legal civil partnership (i.e. co-habiting) there are no legal rights to inherit when one dies. No matter how long they’ve been together or who has contributed what. We’ve seen instances where a surviving partner has lost their home because it was solely in the deceased’s name. In spite of what some still believe, there is no such thing as a ‘common law’ husband or wife.
When a bequest goes directly to a beneficiary it becomes part of that person’s estate. There have been too many cases where someone has inherited substantially, remarried and subsequently divorced. The other party’s lawyers will typically go after everything they can and that may well include the inheritance they received. Losing it outside the family is known as ‘sideways inheritance’ – and it can be avoided with appropriate provisions in a Will.

Similarly, if a beneficiary finds themselves in financial difficulties at some point, whatever they have inherited is going to be vulnerable – but can be protected.
Out-of-date Wills create their own potential problems. Over time things may change in a family and provisions may need adjusting to reflect this. Wills can’t be changed by crossing things out and making notes in the margins (it invalidates them) so it has to be done legally. Poorly drafted Wills can also prove problematic and it’s worth having any Will professionally reviewed every few years.
Then there’s the matter of Inheritance Tax (IHT). While there are tax free allowances that can be as much as £1 million before the 40% tax becomes payable, many people do become liable. Frozen tax thresholds and inflated property and other asset values have contributed to push more families into the tax. IHT earns HMRC more than £7.1 billion annually. It has been estimated that some 40,000 more estates are going to find themselves in that situation this year. There’s no sign of that tax regime being changed any time soon.
While tax evasion is of course illegal, there are perfectly legal ways to reduce an IHT exposure. How this may be done depends on the value and make-up of an estate through appropriate family estate financial planning.