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Most people are aware of the importance of making a Will to help ensure that their estate will be distributed according to their wishes.
If a properly executed Will has been made, it is usually very difficult to challenge. However, if beneficiaries are in agreement, it is possible to vary a Will within the first 2 years of death.
Additionally, In Scotland, a surviving spouse, civil partner or children are each entitled to certain ‘legal rights’ from the ‘moveable estate’ of the person who died, which can override a Will.
England and Wales do not have the same rights of forced heirship as those in Scotland. However, it can sometimes be possible to make a claim for reasonable financial provision under the Inheritance Act 1975.
Where a Will isn’t made, the estate will be distributed according to the laws of intestacy. The intestacy rules differ depending on where someone is domiciled and who survives them, albeit a surviving spouse will always be the main beneficiary, followed by any children of the deceased.
The Government provides a calculator outlining the intestacy rules in different situations - Note that from 26 July 2023, the fixed sum payable to surviving spouses and civil partners on intestacy in England and Wales has increased from £270,000 to £322,000 (at the time of writing, this has not yet been updated on the calculator).
Do all assets fall into the estate
Although a Will outlines what happens to most assets on death, this is not the case for all wealth. Some common high value assets may not always form part of the estate. For instance:
* or joint life insured, on a first death basis
** or joint life insured, on a second death basisAssets distributed under the estate
For assets that are distributed under the Will or intestacy, there are still some specific scenarios to be aware of. These include:
Many larger estates will hold a wide range of assets at death and how they are dealt with can be complicated. It’s therefore important to understand how different assets are treated.
On estates where inheritance tax is due, this must be paid by the end of the sixth month after the person died to avoid interest being charged. Where there is a tax charge, the 'Direct Payment Scheme' can allow the deceased’s funds to be sent to HMRC directly to cover an inheritance tax charge and enable Probate to be granted. The scheme is available where accounts are held with banks, building societies or National Savings & Investments (NS&I), but not for investments held with other providers.
Please note this is for general information only and is based on LV=’s understanding of the relevant legislation and regulations and may be subject to change.
The tax treatment of benefits depends on individual circumstances, and may be subject to change in the future.
The use of this document is at your own risk, and the content should not be used for the provision of professional advice.
LV= accept no liability for any damages, losses or causes of action of any nature arising from your use of this document.