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
  • Cat
    Re: How Will My Second Job Be Taxed?
    Will I still get taxed on my second job if that job's income plus my first one (and any previous one I had that year) amounts…
    13 December 2018
  • LucianoA
    Re: Should I be Paid Mileage Allowance?
    Hi, My employer doesn't pay any mileage allowance, however they offer a company car scheme. My problem is, if I…
    6 December 2018
  • Lou
    Re: How Will My Second Job Be Taxed?
    Hi, I work full time my annual income is 25,000. I am considering taking a second job, how would this effect the amount of…
    14 November 2018
  • Rjrjrj
    Re: How Will My Second Job Be Taxed?
    Hi just need advice on my 2nd job im currently working full time @37 hrs per week min wage and maybe starting 2nd job @16 hrs…
    9 November 2018
  • carol
    Re: What is My Tax Code?
    I have one job permanent but get paid 32 weeks a year. another job in the same place zero hours contract, paid 35 weeks a year I would…
    9 November 2018
  • Ellie
    Re: How Will My Second Job Be Taxed?
    We are currently on working tax credits. My husband earns 8200 and has taken a zero hours job earning roughly 2000 a year .…
    7 November 2018
  • Mikey
    Re: Claiming Tax Relief on Mileage
    I work on building sites as an employee but get no mileage allowance or extra money to cover fuel and travel in my own vehicle.…
    7 November 2018
  • tink
    Re: Can Tax Allowance Be Claimed on Work Clothes?
    Hi I work in a school as a family support worker and travel all over the Wirral supporting them in the…
    6 November 2018
  • Hellc98
    Re: Should I be Paid Mileage Allowance?
    My employer has refused to pay my mileage as they say I have not put my odometer readings on the claim forms. I have…
    5 November 2018
  • Kelly
    Re: What is My Tax Code?
    Hi, I earnt 9k and got taxed 1.1k so far in this tax year as I was on 35k for 3 months. Then I had 3 months of unemployment. And for the rest…
    31 October 2018