I recently got married, and my husband and I realised that as a result we should review our wills – not one of our most romantic moments, but possibly one of our more sensible ones! And even though we both previously had wills, it turns out that when you get married any existing will is automatically revoked unless it was written in contemplation of the marriage1 (this doesn’t apply in Scotland).
Both our lawyers and our financial advisers had said that we would be much better off from an Inheritance Tax perspective if we got married – again not the most romantic of reasons for tying the knot, and certainly not the main reason that we did, but having reviewed our wills, it definitely does make sense. For example, unmarried couples have no automatic rights to the other’s property on death.
This highlights the importance of having a will, married or not, and I’m constantly amazed that more than half of adults in the UK don’t2.
I think most of us know that anything you leave your spouse is free from Inheritance Tax, so this is a good starting point for planning. But as we also know, the tax system is constantly changing and so are the thresholds and limits, so it’s important to make sure that your clients regularly review their wills - every year HMRC receive large amounts of money that with better planning could have gone to loved ones.
Even though we consider ourselves pretty well informed, when we met with our lawyers, we discovered an awful lot we didn’t know. For example, not everybody realises that Inheritance Tax is payable within six months of the person dying whether you’ve received money from the estate at that point or not. This could be a sizeable amount of money that a client’s family might need to find, and this is where the right protection can help to save a lot of problems. A simple life insurance policy written in trust can ensure that the funds are available as soon as a person dies, alleviating a lot of stress and pressure at what is bound to be a difficult time for the family left behind.
And of course, it’s important to consider what happens to the estate once you have both died, and how to minimise the tax that the next generation have to pay. Again the rules and tax-free limits aren’t always easy to understand. But you can help your clients to understand how important it is to plan effectively and help to ensure that the right people receive what is due to them when the time comes.
A lot of people don’t like to think about their own mortality, and it’s not always easy to introduce the conversation. However asking your clients whether they have a will in place will allow you to emphasise the importance of this, and to introduce the IHT and protection conversation.
For more information and tools to help, visit our website.
- 1. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm12074
- 2. Unbiased research September 2016