It emerged in the papers this week that Rick Mayall died Intestate – which is without having a valid Will. Normally, when a person dies without having made a Will the Intestacy Rules apply.
The Intestacy Rules are a set of statutory rules which specify which class of beneficiary is entitled to what in the deceased’s estate.
In their simplest terms:
- In the case of a married couple without children, everything is left to the surviving spouse
- In the case of a married couple with children, the surviving spouse is given a lump sum of up to £250,000 and then half of the remaining estate. The children are entitled to the other half of the remaining estate, split equally between them upon reaching 18 years old
In the case of Rik Mayall, a married man with children, the latter applies. This means that if no action is taken the Intestacy Rules will allocate a lump sum and half of the alleged £1.2million fortune to his widow and the remainder between his children. Unfortunately this creates an Inheritance Tax liability for the estate.
Whilst married couples can leave their estate to each other on the first death free of tax, the monies going to the children will likely be subject to Inheritance Tax of 40% on anything above Mr Mayall’s £325,000 band which is taxed at nil. Therefore, on an estate worth an alleged £1.2million this could amount to tax in the region of £70,000 on the children’s share.
If Rik Mayall had written a Will, both he and his wife could have considered Inheritance Tax Planning – using the available exemptions and reliefs to minimise their liability. Even a simple Will leaving everything to his wife would have increased the opportunities for Inheritance Tax Planning as nothing would be due until the second death.
Although Rik did not have a Will, his estate is not necessarily lumbered with this Inheritance Tax burden. It is possible, within two years of death, to vary the effect of the Intestacy Rules, meaning that the estate could still direct everything to Rik’s wife, rather than split among the children. This approach requires the consent of all the beneficiaries and execution of a Deed of Variation.
If you would like to draw up a Will or review your existing Will, or you have suffered a bereavement and would like some assistance with the estate, please contact a member of our Wills and Probate Team on 01279 755777.