Inherent Problems
Date: 20 February 2009
Authors: Michael Tringham
Issue: Vol 159, Issue 7357
Categories: Features, Legal services, Other practice areas, Wills&probate
Statistics abound in the world of wills and probate. A current favourite is that seven out of 10 Britons have not made a will—and, according to research by The Cooperative Legal Services, have no intention of making one. The most delinquent regions are
Reasons for this delinquency vary from “I’m too young” to “I have no assets to pass on.” Then there are the myths. Over 50% believe it’s necessary to own “more than £200” before being allowed to make a will. Another factor is fear of having to pay “exuberant” [sic] solicitors’ fees.
Whatever the reason, there will be trouble ahead. The statutory amount that a bereaved wife, husband or civil partner is entitled to was doubled on 1 February 2009—up to the first £250,000 of the estate or £450,000 if there are no children. Should the fortune be greater, the rest is shared out according to a set formula, with cohabitees and step-children losing out to close relatives and even Her Majesty’s Treasury under current intestacy legislation.
Enticed to litigate
On the other hand, making a will is no protection against disputatious relatives. City law firm Wedlake Bell say that disputes over wills and inheritance have soared since 2006: contentious probate actions are up by 153%, inheritance disputes by 330%.
The firm’s Fay Copeland says: “We are seeing more and more cases where disputes arise from first, second or even third marriages. Things get even more complicated when it comes to provisions for the children of each marriage. People can end up very displeased with the size of the slice of the estate they receive and have fewer qualms about taking matters to court if they feel they have been treated unfairly. “Long-term cohabitation also creates disputes. The family of a deceased may object to provisions for a cohabitating partner if the couple was never officially married. Likewise, a cohabitating partner might contest a will that does not include provisions for them.
“Even a non-cohabitating partner may be able to contest a will if he was being maintained by the deceased before death. And if a man helps to raise an illegitimate child, or a step-child, with regular maintenance payments, there could be grounds for contesting a will that does not provide for the child after his death.
“With more money at stake there is obviously a bigger enticement to litigate. Anyone leaving a will should be aware that litigation after their death will only reduce the amount of money that does eventually go to whomever they want to leave it to, as the legal costs may be withdrawn from the contested estate. So better get it right the first time around.”
HM Revenue’s late bite
A little-publicised tightening-up of IHT rules could leave executors facing huge tax bills, years after someone has died.
Until now, the taxman had 60 days to raise any questions about the estate account. HMRC has scrapped this limit and is targeting the estates of taxpayers who made gifts prior to death.
In an attempt to round up as much revenue as possible, the taxman is focusing on determining whether assets have been given away within seven years of their death and not declared, leaving them subject to IHT.
The change could mean higher pro bate costs for thousands of families, who have to pay for in-depth investigations to establish that the deceased did indeed make no gifts that exceeded IHT allowances or within seven years of death. Falling house prices and a difficult market are also causing problems. Bill Blevins of accountants and planners Blevins Franks warns that “beneficiaries who are left a home which is proving difficult to sell due to the current credit crisis are facing impossible demands. HMRC probate valuers are standing firm on IHT demands based on the valuation of property—even if the families cannot sell to meet the bill”.
Adding to all this uncertainty is the likelihood of a change of government next year—which makes estate planning in the short term difficult, if not irrelevant, as the Conservatives have said they will make substantial changes to IHT allowances.
So Benjamin Franklin’s dictum, “In this world nothing is certain but death and taxes,” turns out to be unreliable.
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