Home > Inheritance Tax > Distribution of the Estate

Distribution of the Estate

By: J.A.J Aaronson - Updated: 10 Dec 2012 | comments*Discuss
 
Distribution Estate Assets Inheritance

When planning for the mitigation of any potential Inheritance Tax liability, one of the most important factors to consider is likely to be the individuals you wish to inherit your assets. Indeed, one of the key benefits of Inheritance Planning generally is that it allows you, to a great extent, to avoid the possibility of your estate being passed either to recipients whom you had not intended should receive assets, or perhaps worse still, to the Exchequer.

Intestate Death

In order to understand the importance of proper inheritance planning, it is helpful to first look at the implications of intestate death (that is, death without having left a will). In the first instance, whether or not you are married or in a civil partnership will have a significant effect on proceedings. In these cases, your entire estate will pass directly to your spouse or civil partner, but only if your assets have a total value of £250,000 or less.

If your estate is worth more than this figure, however, your spouse or civil partner will not automatically entitled to it all. Rather, they will receive any personal effects, as well as the first £250,000 of the estate tax-free if there are children, or £450,000 if there are not. After this, they will be entitled to a life interest in half of the remainder of the estate. This means that, although this half of the remainder will be the property of your children, your spouse or civil partner will be entitled to its use and benefit until their death, at which point your children will take on complete ownership.

The 50% of the remainder that the spouse or civil partner has not received a life interest in is treated in a specific way. To begin with, each of the children will receive an equal share. If there are no children, it will pass to grandchildren; after this to any surviving parents; after this it will pass to brothers and sisters of the deceased with the proviso that they must have shared both of the same parents. Finally, if none of the above apply, the spouse or civil partner will receive the entire estate – but, of course, only the first £450,000 will be tax-free.

Co-Habitees

The distribution of estates according to intestacy laws can also cause great financial hardship to co-habiting couples. If you live with another individual as if you are married but are not officially husband and wife or in a civil partnership, then the surviving partner is not automatically entitled to anything on your death. Instead, they must make a claim in the same way as any other individual who feels that they have been unfairly provided for after a death. This involves making a claim under the Inheritance (Provision for Family and Dependants) Act 1975.

One of the key problems that co-habitees may encounter with this process is that it requires complainants to prove that they were, according to the Act, “maintained either wholly or partly by the deceased”. This can be particularly difficult if you have both made financial contributions to the household.

As you can see, the rules surrounding intestacy can be complex. As with all matters concerning Inheritance Tax, it is always wise to seek professional advice and much easier if you have made a will.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Yorkie
    Re: How Will My Second Job Be Taxed?
    Hi, I'm in full time employment and in my employers service dept. I earn a decent wage, on the edge if being a higher rate…
    9 April 2019
  • White
    Re: Claiming Tax Relief on Mileage
    Hello there im looking for advice on my current role i have been told i need the fill out a self assessment tax return due to my…
    6 April 2019
  • sim
    Re: Claiming Tax Relief on Mileage
    hi I get payed 45p per mile of my employer for business miles but universal credits say that it's income and reduce my monthly…
    29 March 2019
  • Panco
    Re: How Will My Second Job Be Taxed?
    I work 60 hours per week is £459 in week,but I looking for a job on weekends it’s will be 8 hours £68per booths days how much…
    28 March 2019
  • cdoggywoof
    Re: Are DVLA Car Tax Rates Fair?
    For someone who can only afford a car for £1000 and the VED will cost them £200 each year, which is 20% of the vehicle cost, this…
    21 March 2019
  • Whitely
    Re: How Will My Second Job Be Taxed?
    Hi, I am earning approx £9,000pa working in one job. I have been offered a second job where I will earn £3,400pa so it takes…
    19 March 2019
  • Leroy
    Re: How Will My Second Job Be Taxed?
    If i work 16.2.5 hours a week then in a second job do 10 hours a week how much tax will a pay
    13 March 2019
  • Fire
    Re: How Will My Second Job Be Taxed?
    Hi I work part time 22.5 hrs week and earn £17,500 year. I have just been offered extra work of 3 - 6 hours a month earning…
    13 February 2019
  • shelle
    Re: How Will My Second Job Be Taxed?
    i currently work 10 hors in supermarket been offered a job at care home 30 hours a week how / what will happen to tax how…
    23 January 2019
  • Wild child
    Re: How Will My Second Job Be Taxed?
    Hi I have a full time job and get 16,500 a year but thinking of getting a second job that I get 5,280 a month how much tax…
    21 January 2019