Jack and Jill are in their late sixties and are happily married with two children: Bill and Ben. Bill is happily married but the business he owns is under some financial pressure and he is rather worried because the bank are talking about calling in the loan of £150,000. Ben is married but his marriage to Rose is a bit rocky. Jack and Jill have intended on keeping their finances separate and they own their two properties as “tenants in common”. The “buy to let” provides roughly half of the family’s annual income. Jack and Jill have considered writing a Will but under the (incorrect) impression that everything would “go to each other”, have never “got around to it”.
The family home is worth £800,000 and the “buy to let” is worth £600,000. Jack has ISAs to the value of £200,000 as does Jill.
Jack is taken ill and dies. The family assumes that all Jack’s assets will go to Jill. Rose starts to take great interest in the estate finances (soon you will see why) and brings the “Laws of Intestacy” to the attention of the family.
Jack’s assets are half of the family home (£400,000) and half of the “buy to let” (£300,000) plus his ISAs at £200,000. So his estate is worth £900,000. Rose starts taking control and advises the family that Jill is entitled to the first £250,000 and then half of the balance with the other half being shared between Bill and Ben.
So Jill receives £250,000 and half of £650,000 which is a total of £575,000. Bill receives £162,500 and Ben receives £162,500. There is not enough cash to pay Bill and Ben so the “buy to let” has to be sold. This means that about half of the family’s annual income is lost. The bank becomes aware that Bill has just inherited £162,500 and calls in their loan in the sum of £150,000. Now that Ben has just received £162,500 Rose thinks this is a good time to divorce Ben. As part of the divorce settlement Rose receives 50% of the £162,500.
Because assets went directly from Jack to Bill and Ben his entire Inheritance Tax allowance of £325,000 has been used up and is not available to be transferred to Jill.
All of the above could have been avoided if Jack had contacted Casey & Associates and made a Will.
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