Financial Wellbeing: Death and Taxes

So, we’ve heard it before – the only thing in life that is certain is death and taxes. Whilst we can’t change the first one of these, there are some things we should be aware to minimise the second.

Firstly, are you aware of what will happen to your assets when you die? It’s a sobering fact to consider that if you’ve not made a will and you’re not married or in a civil partnership, your partner is not legally entitled to anything when you die.

Even if you are married or in a civil partnership it’s not straightforward, without a will, your spouse may inherit most or all of your estate but your children may not get anything. This is true even if you are separated (but not if you’re divorced, except in Scotland).

If you die with no living close relatives and you haven’t made a will, your whole estate will belong to the Crown or to the government. This law is called bona vacantia and last year, the government received money and property to the value of £8 million from people who didn’t make a will.

Apart from making sure your wealth goes to those people you choose, you will need to consider whether there is any inheritance tax to pay. It is important to note that a spouse or civil partner does not have to pay any tax on any assets they inherit (although this is not necessarily a good reason to get married!). If you wish to leave anything to other members of your family or friends, and your estate is worth more than £325,000 (the current inheritance tax threshold) the standard rate of tax payable will be 40% of everything over that amount.

Making a will is easy, you can do it online, or through a solicitor and each year solicitors around the country participate in ‘Willaid’, an initiative to get people writing their wills in return for a donation to charity.

Your Company benefits

If you are employed, you may be entitled to death in service benefits, these benefits provide your loved ones with a cash lump sum should you die whilst employed. You normally need to complete separate forms for your death in service and pension benefits and your employer should be able to provide these forms to you. You can normally  elect as many people as you like, allocating a percentage of the benefit to each individual – please make sure it adds up to 100%. It’s normally free of inheritance tax – but it won’t be if your beneficiary is your ‘estate’ so please take some time, nominate individuals and make sure there is sufficient information to identify and contact them in the event of your death.

You can (and should) change these beneficiaries if your circumstances change, for instance, if you get married, have children, get divorced etc. and the most up to date form will be used.

Please don’t forget that if you have pension arrangements with previous employers, there may also be some benefits available on your death so you should change the beneficiaries on these plans if your circumstances change.

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