A Guide to Inheritance

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Estate planning is not just for the super-rich. Whether you have a sprawling mansion or a small flat, some savings, or even just personal belongings, deciding who inherits your estate in the UK is essential.

Here’s a guide on how to approach this significant decision.

Understand the Basics of Inheritance Law

In the UK, if you die without a will (known as ‘dying intestate’), your assets are distributed according to the rules of intestacy. This means that only certain relatives will inherit, and some, like unmarried partners, friends, and charities, won’t get anything. Creating a will ensures your assets are distributed according to your wishes.

Take Stock of Your Assets

Before you can decide who gets what, take inventory of what you own. This includes:

  • Property (houses, flats, land)
  • Financial assets (bank accounts, savings, ISAS, stocks and shares, bonds)
  • Personal possessions (jewelry, artwork, vehicles)
  • Digital assets (online accounts, digital media)

Here are a few things that aren’t included in your residuary estate:

  • Pensions or life insurance policies written in trust: these go directly to the person you nominated when you took out the policy, so can’t be shared out as part of your residuary estate.
  • Joint bank accounts: these automatically go to the joint-owner when you die.
  • Jointly-owned property: if you own the property as joint tenants, it will go to the joint owner.

Consider Your Beneficiaries

Think deeply about the people and causes that matter to you. Beneficiaries can include:

  • Family members
  • Partners (note: unmarried partners don’t automatically inherit if you die intestate)
  • Friends
  • Charities and organizations

It is also prudent to appoint secondary beneficiaries in case your chosen beneficiary dies before you.

In the unlikely event that all your primary and secondary beneficiaries die before you, your estate will be distributed according to the rules of intestacy.

Think About Fairness vs. Equality

This is a personal choice. Do you wish to divide assets equally, or do you believe certain beneficiaries have a greater need or claim?

For example, if one child has been more financially successful than the other, do you give an equal inheritance or adjust based on perceived need? It’s crucial to communicate these decisions to avoid misunderstandings later.

Consider Potential Tax Implications

In the UK, inheritance tax (IHT) might apply to your estate. The threshold and rates can change, so it’s essential to consult a financial adviser or solicitor to understand potential tax implications and ways to mitigate them.

Appoint an Executor

An executor is responsible for ensuring your will is carried out as you intended. This role can be complex, so choose someone trustworthy, organised, and, ideally, with some understanding of financial matters.

Write Your Will

Once you’ve made your decisions:

  • Use Plan This Way to draft your will.
  • Store the will safely and inform your executor of its location.
  • Consider registering your will with a will registration service.

Review & Update

Circumstances change. Marriages, births, deaths, and shifts in financial situations can influence who you wish to inherit your estate. It’s a good idea to review your will every 5 years or after any significant life event.

Leave Explanatory Letters

An explanatory letter can provide context to your decisions. While not legally binding, it can help alleviate potential conflicts among beneficiaries by explaining your reasons.

Seek Professional Advice

Estate planning can be complex, especially if you have substantial assets or complicated family dynamics. Solicitors and financial advisers can provide valuable advice and ensure your will is legally sound.

Deciding who inherits your estate is a deeply personal decision. By being proactive, seeking advice, and communicating your intentions, you can ensure your wishes are respected and your loved ones are provided for in the way you deem best.

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