There is never really a good time to talk about dying and what happens to your money and assets when you’re gone.
By not making a will, though, you could be leaving your family in financial upheaval after you die.
You’re not alone. According to a recent research by Macmillan Cancer Support, nearly 31 million people in the UK - including nearly half of those aged over the age of 55 - haven’t got a written will.
If this is you, you should waste no time in rectifying it. It is even more pressing now thanks to new changes to Inheritance Tax allowing you to pass on more of your estate tax free; you could leave more to your loved ones when you’re gone.
Not having this changes reflected in a written will, however, could mean leaving your family worse off.
How this affects your property
As of April 2018, you are now entitled to a further £125,000 tax-free ‘family home’ allowance above the 40 per cent threshold of £325,000 at which you become liable to pay inheritance tax, so long as a family home is bequeathed to your children or grandchildren.
This extra allowance can also be transferred to a surviving spouse when you die if it hasn’t already been used up.
“This will allow a married couple to be able to pass on as much as £1 million to their families,” explains Bob Hair, Wealth Planning Director at Cazenove Capital.
It also means, he adds, that property can be passed on to direct descendents without having to worry about putting it up for sale to cover a hefty tax bill.
Many people believe that they don’t need to worry about inheritance tax as its only for the rich but rising wealth - from burgeoning house prices to owning a car - means more people are facing the prospect of paying it.
This nil-rate tax band is set to continue increasing incrementally in the coming years. For the 2019-2020 tax year, the allowance has risen to stand at £150,000. This will swell to £175,000 by the 2020-2021 tax year.
In short, your direct family will inherit less and potentially pay more in tax if they are not officially acknowledged as beneficiaries of your property in a written will.
This also goes for pensions, too.
Pension schemes with significant value are not counted in a person’s taxable estate but have in the past been subject to inheritance tax if taken in a lump sum and left unused.
“If you die, you can also pass on your pension to family members. Your spouse or partner can stand in your shoes,” clarifies Hair.
Transfering your final salary scheme to a ‘defined contribution’ pension pot means your family will continue to receive it when you’re gone. This can help reduce the amount of tax your family is liable to pay.
If you haven’t thought about making a will, there’s no time like the present to make sure your affairs are in order; not only for your own peace of mind, but to make sure your family is adequately provided for in the years to come.