It is important for you to make a will because if you do not, and die without a will, the law on intestacy decides what happens to your property. A will can ensure that proper arrangements are made for your dependants and that your property is distributed in the way you wish after you die, subject to certain rights of spouses/civil partners and children.

It is a very foolish to assume that if your next of kin know your wishes that they will sort it out between themselves. Firstly all of your next of kin will need to agree. Secondly, there are often tax consequences that make some arrangements between next of kin undesirable.

If you have a minor child or children i.e. children under the age of 18, then we recommend in the strongest terms that you have a Will to appoint Guardians and Trustees for those children and that proper provisions is made for them.

These issues are dealt with in more detail below.

Record the basic information (see our guide and questionnaire which can help with this):

• Your Assets, Their Value and Where They are located
  It is important that after your death your Executors will have details of all your assets and know where to find bank books, shares/savings certificates, deeds, life insurance policies and all relevant financial information.
• Nearest Relatives
  Set out particulars of your immediate family, i.e. the names of your spouse, children or other dependants (including their dates of birth) or otherwise your closest living relatives and their addresses.
• Executors
  Choose the person/s best suited to carrying into effect the terms of your Will. An advantage of making a Will is that your beneficiaries avoid the cost of an Administration Bond (this is an insurance policy) which is  required where no Executors are appointed. A minimum of two Executors are recommended and if you are a senior citizen, at least one of those should be younger than you.
• Proposed Division of Your Estate
  The usual format is:
  Cash legacies (e.g. friends, charities, religious).
  Bequests of specific property (e.g. jewellery, furniture, etc.) It may be convenient to deal with these in a letter of wishes coupled with a discretionary power for the Executors appointed in the Will.
  Any other special provisions (see “special circumstances”).
  Residuary bequest (which may comprise most of your estate).
  Consider the possibility that some relatives/friends may be disappointed and think about any explanation you would like your Executors to give.
• Restrictions (where a Will is made)
  The law imposes certain restrictions on how you may deal with your Estate. Your spouse has a legal right to half of your Estate where there are no children. If there are children, your spouse is entitled to onethird of your Estate. Your children are not automatically entitled to any part of your Estate but they may apply to court if you fail in your moral duty to make proper provision for them in accordance with your means, taking into account their position in life. Your spouse also has a right to require that the family home and household contents be included in his/her share (and the share of children under the age of 18).
• Special Circumstances/Assets
  Special considerations arise if:
  Any of the beneficiaries are under 18 years of age (see “What if I have
  young children?”).
  Any of the beneficiaries suffer from a disability (see “Discretionary
  Trust”)
  A farm or business is involved or your dwelling house is the main asset (see “No cash assets” and “Discretionary Trust”).
• Funeral Wishes
  You should inform your family in your lifetime as to what your funeral wishes are, as your Will may not be read until after the funeral. If you wish to have a headstone on the grave, you should state this in the Will.

If you have children under 18 years of age, your Will should give directions for the care of those children and how they are to be provided for. Unmarried couples additionally should ensure that each of their Wills clearly states who is to have custody and guardianship of their children if one of them dies. Most importantly, both married and unmarried couples should ensure that their Wills clearly state who is to have custody and guardianship if both spouses/partners die.
• Guardians
A Guardian is the person you select to take over your role as parent in rearing your children under 18 years of age.
• Trustees
You can appoint a trustee to look after the assets in your Estate; an Executor can also be a Trustee. Your Will should give your Trustees enough powers to allow them to be flexible in deciding what maintenance and other payments should be made for the benefit of your children.
• Provision for children
You may wish your Estate to be divided equally between your children when they reach a specified age. You can arrange for them to receive an income from the Estate, possibly from 18 years of age; alternatively, you may set up a “discretionary trust” for your children until the youngest reaches age 18 (see “What is a Discretionary Trust?”). Alternatively, if the children are likely to stay with a relative, consider
enabling your Executor /Trustee to advance money to the new household budget, including allowing for monies for increased mortgage payments on ‘a larger home to accommodate both families.

Being separated from your spouse does not mean that your spouse automatically loses his/her legal right to a share of your Estate; however, his/her rights may be cancelled under the terms of a separation agreement or judicial separation, or can be cancelled by court order when a couple divorce.

In the case of divorce, a former spouse who claims that proper provision has not been made for him/her may apply to court for a share of the deceased’s Estate within 6 months from the date of grant of probate or grant of administration. Personal representatives are required to make reasonable attempts to notify the former spouse. A share will not be given to a former spouse who has remarried. The same rules apply to a separated spouse.

In the case of unmarried partners, the “partner” will have no succession rights and will therefore be limited to whatever rights he/she may establish in contract (e.g. where he/ she has financially contributed to the purchase of a property) or where he/she is entitled under your Will. Do not assume that the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 conferred inheritance rights upon cohabiting couples. If you are in a cohabiting relationship and you die without a will, your partner has no right to any share of the Estate no matter how long you have been together, apart from what was held jointly. Many people are not aware of this, so it is very important to know your rights in this situation. For further information please
refer to www.citizensinformation.ie

A statutory civil partnership registration scheme for same-sex couples was introduced in January 2011 under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. On registration of a civil partnership, civil partners are treated in the same way as spouses under the tax and succession codes. A Civil partner has a legal right to a share in their partner’s Estate when they die, no matter what that deceased partner may have said or specified in your will. This does not apply to cohabiting couples. In other words, if you are in a cohabiting relationship, there is nothing to prevent you from leaving some or all of your property to your partner in your will.

However, if you are or have been in a civil partnership, your civil partner may be legally entitled to a share of your Estate even though you are now separated from him/her.

Who can make a claim?

Article 3(1) of the order lists those who can make a claim for financial provision against the estate. These are as follows:
(a) the wife or husband of the deceased;
(b) a former wife or former husband of the deceased who has not remarried;
(ba) any person (not being a person included in sub-paragraph (a) or (b)) who during the whole of the period of two years ending immediately before the date when the deceased died, was living in the same household as the deceased and as the husband or wife of the deceased;
(c) a child of the deceased;
(d) any person (not being a child of the deceased) who, in the case of any marriage to which the deceased was at any time a party, was treated by the deceased as a child of the family in relation to that marriage;
(e) any person (not being a person included in sub-paragraphs (a) to (d)) who immediately before the death of the deceased was being maintained, either wholly or partly, by the deceased;

Category (b) (a) above refers to unmarried co-habitees who have a relationship similar to a spouse. They must have been living together with the deceased for at least two years prior to the deceased’s death.

Under category (c), a child is a child of any age. It does not include stepchildren, but the latter may have a claim under category (d). An adopted child is treated in law as the child of the Adopter.

Category (e) is for any kind of claimant who had a dependency on the deceased prior to his death.

Grounds for making a claim

The Ground which all claimants have to satisfy is that the provision of the deceased’s will or intestacy does not make adequate financial provision for
the claimant.

In deciding the adequacy of financial provision, the court has to have regard to the guidelines provided by Article 5. Generally speaking, the court makes a balancing exercise between the financial needs and resources of the claimant and the beneficiaries BUT

(1) when dealing with spouses, former spouses and co-habitees under category (ba) (see section 5.1 above) the court has to also take into
account
(a) the age of the applicant
(b) the length of the marriage (in the case of spouses or former spouses) or (in the case of cohabitees) the period during which the applicant lived as the husband or wife of the deceased and in the same household as the deceased; and
(b) the contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family; AND
(2) In the case of spouses (who did not have a decree of judicial separation where the separation was continuing at death) the court has to take into account what s/he would have been entitled to on a divorce.

Is there anything I can do to avoid such a claim being made?

The short answer is generally “no”. A lifetime gift is treated as part of your estate unless that gift was made more than 6 years before your death. You may, however, wish to consider making some provision in your will which may act as a deterrent (see section 2 above on minimising challenges to your will).

If your only asset is a house, business or farm and you do not have sufficient cash, you can leave the house to a particular beneficiary on condition that the beneficiary arranges for legacies to be paid to other beneficiaries. In the case of an elderly brother/sister, you could consider leaving the house, business or farm to them for their lifetime and state in your Will what you want done with the property after their death.

Property held jointly (rather than in separate shares) passes on to the survivor where there is clear evidence that this is intended. However, there are legal rules which may prevent this.

With Bank accounts, it is not unusual to open a joint account for convenience (e.g. where the original account holder is elderly or immobile) or for a specific
purpose (e.g. to pay for the funeral). It is therefore important when opening such accounts to specify in writing whether it is intended that the survivor is to keep the money. You should take specific steps to ensure that your intention is clear as to what is to happen to the account on your death.

This provides your Trustees with full power to apply capital and income at their discretion for the benefit of your beneficiaries. This may mean that some beneficiaries will receive more than others – that is up to the Trustees to decide. A discretionary trust can be useful where beneficiaries are young, suffer from a disability, are elderly, for a dependant relative and for tax planning purposes for larger estates.

Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances. Inheritance tax may have to be paid if property is inherited on the death of any person
(e.g. under a Will or on intestacy). Gifts and inheritances between spouses are exempt. Other relevant information regarding inheritance tax is set out below.

The tax free threshold amount increases each year

The date for payment of inheritance tax (the valuation date) depends on the circumstances of each case. Tax must be paid within 4 months of the valuation date and interest is payable on overdue tax.

In some circumstances certain types of property (e.g. government stocks) left to persons who are not resident or domiciled in Ireland, or heritage property, may be exempt from CAT.

It is important to plan the passing of your assets so as to minimise the tax that your beneficiaries have to pay.

Step 1: Look at the reliefs available
Step 2: Look at dividing up your property to use all available tax free thresholds.
Step 3: Look at providing a fund to pay CAT (insurance).

AGRICULTURAL PROPERTY
If a specified percentage of the beneficiary’s property (after an inheritance) consists of agricultural assets, then the beneficiary may qualify for agricultural relief, so that the value of the agricultural property he/she inherited is reduced by a specified percentage when calculating inheritance tax (if any). The relevant percentages are set out in the last 2 pages of this leaflet.

BUSINESS PROPERTY
If business property, which would generally include assets such as a business or shares in a family company, is inherited, then the beneficiary may be entitled to claim business relief so that the value of the business property inherited is reduced by a specified percentage when calculating the inheritance tax (if any). For details of the current percentage reduction, please refer to the last 2 pages of this leaflet.

FAVOURITE NEPHEWS/NIECES
If the beneficiary is a nephew or niece who worked full-time in the business with you for five years, and you leave the business to him/her,then he/she will be entitled to the same tax-free threshold as son or daughter in relation to that property.

DWELLING HOUSE
If you leave a house to a beneficiary who has continuously occupied it as his/her main residence for a period of three years immediately before the date of your death, and he/ she continues to occupy it for a period of six years after the date of death, then such a beneficiary will be exempt from tax on the value of the house provided all the conditions for exemption are complied with.

MINOR CHILD OF DECEASED CHILD
If you leave property to a grandchild who is the child of your deceased child, and the grandchild is under the age of 18, then that grandchild will be entitled to the same tax free threshold as son or daughter.

SURVIVING SPOUSE RELIEF
If the property is left to the spouse of a deceased member of your family, that spouse will be entitled to the tax free threshold amount that the deceased family member would have been entitled to in relation to that inheritance.

NB: Each relief has conditions that must be met. Professional advice should be obtained when considering whether a particular relief is applicable.

If you divide your property among the family of the person you wish to benefit, the tax free thresholds available are multiplied accordingly. For example, if, instead of leaving property to your daughter, you leave the property to your daughter, son-in-law and three grandchildren, then you can leave each person property to the amount of the tax free threshold relevant to each of them individually, without triggering a tax liability.

If inheritance tax is going to arise on your Estate then it is possible to take out an insurance policy (called a section 60 policy) the proceeds of which are exempt from inheritance tax if used to pay inheritance tax.

A discretionary trust is useful where the person making the Will wants to benefit a wide group of people (for instance to include grandchildren, persons not yet born and future spouses) and would like to provide for some flexibility as to who should benefit or the amount they should be given.

Discretionary trusts are liable to a once off tax on the death of the person creating the trust, once his /her spouse and all other children are over the age of 21. There will be a refund if the trust is distributed fully within a certain number of years. There is a further tax liability each year following the first
year. 

Immovable Property

• Tend to be prudent for a Will to be made in the country where the property is situate
• General Rule of Thumb, under Private International Law, a Will dealing with Movable Property will be construed in accordance with the laws of the domicile of the person making it, whereas a Will dealing with Immovable Property will be construed in accordance with the laws of the place where the property is situated
• For example, not every jurisdiction might recognise a “Life Interest

• Exercise great caution that the foreign Will does not revoke the domestic Will and vice versa
• Each Will should contain a Declaration that such Will is to apply to property within a particular jurisdiction or to which that jurisdiction’s laws apply and it should also say “This Declaration also applies to the revocation clause contained in this my Will”

• Executors and Trustees should have power to run your business
• Company Issues – Shareholding – Articles of Association
• Successor Issues

If you have cross-border assets, you and your solicitor should consider the following:

• Do you need more than one Will?
• Where are you domiciled? If there is any potential doubt about this, steps should be taken to ensure you have the right evidence
• Where are you Resident or Ordinarily Resident?
• Once again steps may have to be taken to ensure that you have the right evidence
• The tax implications of your wishes

Where a deceased person held assets in two different countries or jurisdictions, he or she is said to have a “cross-border estate”

• In which jurisdiction should the property of a crossborder estate be administered?
• If there is no will, which intestacy laws apply?
• How the estate is to be taxed?
• Where was the deceased domiciled?

• In Roman times special privileges were accorded to individuals who were citizens of a Roman city
• This has developed over the centuries and there are various ways of acquiring domicile of a particular jurisdiction e.g. Domicile of Origin, Domicile of Choice, Domicile of Dependency and Deemed Domicile

What is a Grant of Representation?

A Grant of Representation is an official legal document issued by a government agency, usually known as the Probate Office, to the Personal Representatives of the deceased person that allows the Personal Representatives to administer or deal with the assets of the deceased.

• If the deceased person had assets in two countries, the general rule is that a Grant of Representation will be required in each country
• When administering a Will, you apply to the Probate Office in the country where the deceased person was domiciled first
• Colonial Probate Acts whereby Northern Ireland, England and Wales recognise Irish Grants of Representation and “Reseal” them
• The Republic of Ireland does not have a reciprocal arrangement

What is Intestacy?

• When a person dies without having made a will, they are said to have died “intestate”. If a person dies intestate then their estate will be divided up or administered in accordance with the Rules of Intestacy
• These Rules of Intestacy tend to vary hugely from country to country

The general rule is that in all jurisdictions within the United Kingdom and the Republic of Ireland, the correct jurisdiction to apply the intestacy rules is the jurisdiction in which the deceased was domiciled.

• The only exception to the general rule relates to Immovable Property in the Republic of Ireland
• The Republic of Ireland intestacy rules apply to land and buildings, regardless of where the owner was domiciled
• The deceased person’s farm or business in the Republic of Ireland may well be divided up among his next of kin in a different proportion than his Northern Ireland property

• “Issue” includes children, grandchildren and great grandchildren etc. living at the date of the deceased person’s death
• If there is a surviving spouse (or civil partner) and surviving issue, the spouse (or civil partner) gets:
  a) The first Stg£250,000; and
  b) The personal chattels; and
  c) (i) If there is one surviving child (with no predeceased child leaving issue) or no surviving children and one predeceased child leaving issue, half of the residue
  (ii) If the deceased had no surviving children but more than one predeceased child leaving surviving issue, or one surviving child and one or more predeceased children leaving issue, or at least two surviving children, one third of the residue

• And in the case of c)(i) above, the child (or if predeceased the issue) gets one half of the residue. And in the case of (c)(ii) above, the children, child or issue get two thirds of the residue
• If there is a surviving spouse (or Civil Partner) and no issue but surviving parents, siblings (or their issue) the spouse (or Civil Partner) gets:
  a) the first £450,000
  b) the personal chattels
  c) one half of the residue
• And the other half of the residue is divided as follows: If the deceased is survived by one or more parent, they take in equal shares but if there are no surviving parents then siblings take in equal shares
• If there is a surviving spouse (or Civil Partner) and no surviving issue, parents or siblings or their issue, the spouse takes the entire estate. If there is no surviving spouse, the next of kin take according to the rules of priority

• If a person dies without making a will, and he or she is survived by a spouse (or Civil Partner) and issue e.g. children or grandchildren then the surviving spouse shall be entitled to two-thirds of the Estate
• If there are no issue then the surviving spouse (or Civil Partner) is entitled to the entire Estate
• If there is no spouse or issue, the Estate will go to the next of kin in accordance with the rules of priority

It is important for you to make a will because if you do not, and die without a will, the law on intestacy decides what happens to your property. A will can
ensure that proper arrangements are made for your dependants and that your property is distributed in the way you wish after you die, subject to certain rights of spouses/civil partners and children.

It is a very foolish to assume that if your next of kin know your wishes that they will sort it out between themselves. Firstly all of your next of kin will need
to agree. Secondly, there are often tax consequences that make some arrangements between next of kin undesirable.

If you have a minor child or children i.e. children under the age of 18, then we recommend in the strongest terms that you have a Will to appoint Guardians and Trustees for those children and that proper provisions is made for them. These issues are dealt with in more detail below.

Record the basic information (see our guide and questionnaire which can help with this):

• Your Assets, Their Value and Where They are located
  It is important that after your death your Executors will have details of all your assets and know where to find bank books, shares/savings certificates, deeds, life insurance policies and all relevant financial information.
• Nearest Relatives
  Set out particulars of your immediate family, i.e. the names of your spouse, children or other dependants (including their dates of birth) or otherwise your closest living relatives and their addresses.
• Executors
  Choose the person/s best suited to carrying into effect the terms of your Will. An advantage of making a Will is that your beneficiaries avoid the cost of an Administration Bond (this is an insurance policy) which is  required where no Executors are appointed. A minimum of two Executors are recommended and if you are a senior citizen, at least one of those should be younger than you.
• Proposed Division of Your Estate
  The usual format is:
  Cash legacies (e.g. friends, charities, religious).
  Bequests of specific property (e.g. jewellery, furniture, etc.) It may be convenient to deal with these in a letter of wishes coupled with a discretionary power for the Executors appointed in the Will.
  Any other special provisions (see “special circumstances”).
  Residuary bequest (which may comprise most of your estate).
  Consider the possibility that some relatives/friends may be disappointed and think about any explanation you would like your Executors to give.
• Minimising potential challenges to a Will after your death
  There are two categories of challenges to a Will. One is a challenge on the basis that the Will has not been validly executed or there has been some undue influence by a person seeking to benefit himself or somebody else. Providing instructions to a solicitor is one of the best ways to prevent that kind of challenge because he will take careful instructions and create evidential safeguards to minimise this risk.
  The other potential challenge to a Will is under the Inheritance (Provision for Family and Dependants) (NI) Order 1979. This is dealt with in more detail under section 5.00 below. You need to consider very carefully whether your proposed Will makes adequate provision and therefore deters a relevant person from making the claim. Special consideration should be given to a potential claim by Spouses or Co-habitees living as husband or wife. Giving a claimant something to lose by claiming is one kind of deterrent, e.g. making a gift to A provided s/he does not make a claim against the estate.
• Special Circumstances/Assets
  Special considerations arise if:
  Any of the beneficiaries are under 18 years of age (see “What if I have
  young children?”).
  Any of the beneficiaries suffer from a disability (see “Discretionary
  Trust”)
  A farm or business is involved or your dwelling house is the main asset (see “No cash assets” and “Discretionary Trust”).
• Funeral Wishes
  You should inform your family in your lifetime as to what your funeral wishes are, as your Will may not be read until after the funeral. If you wish to have a headstone on the grave, you should state this in the Will.

You should consider appointing a guardian for your child. A guardian is a person who is charged with caring for your child after you die. However, an appointment of a guardian is of no legal effect (i.e. it does not give him/her legal parental responsibility UNLESS you are a person with sole parental responsibility of a child or children under the age of 18 years.

A mother or a married father will automatically have parental responsibility. An unmarried father of a child does not have parental responsibility unless or
until:
(a) He marries the mother; or
(b) He is shown on the birth certificate as the father of the child AND
the child was born after 16th April 2002; or
(c) He has a parental responsibility agreement with the mother which is
registered in the Court; or
(d) He has obtained a parental responsibility order in the Court; or
(e) He has obtained a residence order.

A non-parent can only have parental responsibility of a child if he or she has obtained a residence order.

There are some circumstances where it might be desirable to appoint a guardian for a child, but where it is no legal power to do so. For example, if you are a foster carer or if you have a disabled adult child who needs looking after. In those circumstances, it is the Court or, in some instances, Social Services, who decides who looks after the child when you die. Nevertheless, it is still recommended that you make a statement as to whom you would wish to look after the child and set out your reasons why. Such a wish will certainly be taken account of by the authorities and can be used as evidence in a court in a disputed case.

• Trustees
  You can appoint a trustee to look after the assets in your estate; an Executor can also be a Trustee. Your Will should give your Trustees enough powers to allow them to be flexible in deciding what maintenance and other payments should be made for the benefit of your children.
• Provision for children
  You may wish your estate to be divided equally between your children when they reach a specified age. You can arrange for them to receive an income from the estate, possibly from 18 years of age; alternatively, you may set up a “discretionary trust” for your children until the younges 
  reaches age 18 (see “What is a Discretionary Trust?”). Alternatively, if the children are likely to stay with a relative, consider enabling your Executor/Trustee to advance money to the new household budget, including allowing for monies for increased mortgage payments on a larger home to accommodate both families.

A separated or divorced spouse or a partner of two years or more are amongst the classes of persons entitled to claim against a deceased’s estate under the Inheritance (Provision for Family and Dependants) (NI) 1979. However, the spouse’s (or former spouse’s) rights may be cancelled under the terms of a court order in a claim for ancillary relief made in Divorce or Judicial separation actions.

In the case of unmarried partners, the “partner” may also have a claim against the estate but such a claim is not likely to be as strong as a claim by a spouse, former spouse or Civil Partner (see below).

For more information on claims under the Inheritance (Provision for Family and Dependants (NI) Order 1979 please refer to section 5.00 below.

On registration of a civil partnership between same sex couples, civil partners are treated in the same way as spouses under the tax and succession codes. A Civil partner has a legal right to a share in their partner’s Estate when they die, no matter what that deceased partner may have said or specified in your will. This does not apply to cohabiting couples. In other words, if you are in a cohabiting relationship, there is nothing to prevent you from leaving some or all of your property to your partner in your will.

Who can make a claim?

Article 3(1) of the order lists those who can make a claim for financial provision against the estate. These are as follows:
(a) the wife or husband of the deceased;
(b) a former wife or former husband of the deceased who has not remarried;
(ba) any person (not being a person included in sub-paragraph (a) or (b)) who during the whole of the period of two years ending immediately before the date when the deceased died, was living in the same household as the deceased and as the husband or wife of the deceased;
(c) a child of the deceased;
(d) any person (not being a child of the deceased) who, in the case of any marriage to which the deceased was at any time a party, was treated by the deceased as a child of the family in relation to that marriage;
(e) any person (not being a person included in sub-paragraphs (a) to (d)) who immediately before the death of the deceased was being maintained, either wholly or partly, by the deceased;

Category (b) (a) above refers to unmarried co-habitees who have a relationship similar to a spouse. They must have been living together with the deceased for at least two years prior to the deceased’s death.

Under category (c), a child is a child of any age. It does not include stepchildren, but the latter may have a claim under category (d). An adopted child is treated in law as the child of the Adopter.

Category (e) is for any kind of claimant who had a dependency on the deceased prior to his death.

Grounds for making a claim

The Ground which all claimants have to satisfy is that the provision of the deceased’s will or intestacy does not make adequate financial provision for
the claimant.

In deciding the adequacy of financial provision, the court has to have regard to the guidelines provided by Article 5. Generally speaking, the court makes a balancing exercise between the financial needs and resources of the claimant and the beneficiaries BUT

(1) when dealing with spouses, former spouses and co-habitees under category (ba) (see section 5.1 above) the court has to also take into
account
(a) the age of the applicant
(b) the length of the marriage (in the case of spouses or former spouses) or (in the case of cohabitees) the period during which the applicant lived as the husband or wife of the deceased and in the same household as the deceased; and
(b) the contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family; AND
(2) In the case of spouses (who did not have a decree of judicial separation where the separation was continuing at death) the court has to take into account what s/he would have been entitled to on a divorce.

Is there anything I can do to avoid such a claim being made?

The short answer is generally “no”. A lifetime gift is treated as part of your estate unless that gift was made more than 6 years before your death. You may, however, wish to consider making some provision in your will which may act as a deterrent (see section 2 above on minimising challenges to your will).

If your only asset is a house, business or farm and you do not have sufficient cash, you can leave the house to a particular beneficiary on condition that the beneficiary arranges for legacies to be paid to other beneficiaries. In the case of an elderly brother/sister, you could consider leaving the house, business or farm to them for their lifetime and state in your Will what you want done with the property after their death.

Property held jointly (rather than in separate shares) passes on to the survivor where there is clear evidence that this is intended. However, there are legal rules which may prevent this.

With Bank accounts, it is not unusual to open a joint account for convenience (e.g. where the original account holder is elderly or immobile) or for a specific
purpose (e.g. to pay for the funeral). It is therefore important when opening such accounts to specify in writing whether it is intended that the survivor is to keep the money. You should take specific steps to ensure that your intention is clear as to what is to happen to the account on your death.

It should also be noted that a deceased’s share of joint property is still treated as part of his estate for Inheritance Tax purposes. Further, joint property forms part of the deceased’s estate for the purpose of the Inheritance (Provision for Family and Dependants) (NI) Order 1979 (see section 5.00 above) and can therefore be claimed against.

This provides your Trustees with full power to apply capital and income at their discretion for the benefit of your beneficiaries. This may mean that some beneficiaries will receive more than others – that is up to the Trustees to decide. A discretionary trust can be useful where beneficiaries are young, suffer from a disability, are elderly, for a dependant relative and for tax planning purposes for larger estates.

Inheritance Tax

The tax, which is primarily concerned with death, is Inheritance tax. Put simply, it is a tax against inheritances and has to be paid whether the inheritance is a gift by will or acquired on intestacy. More detailed information about this tax is set out below.

Capital Gains Tax
Capital gains tax (CGT) is a tax on gains made as a result of a disposal of an asset. The mechanism for calculating a taxable gain is complex and outside
the scope of the information provided here. Generally, speaking, a gain is calculated by deducting the acquisition value of the asset from the sale value of the asset. When a person dies, there is no CGT payable on a person’s estate by reason of the fact that there is a disposal from a gain resulting from the deceased’s death. Although CGT is not primarily concerned with death, its inter-relation with Inheritance tax can be significant, particularly when there is a substantial gain in an asset between death and the date of sale. Furthermore, for some individuals, a decision as to whether or not to make a lifetime gift to save Inheritance tax has to be balanced with considerations as to whether CGT becomes payable.

When is the tax payable?

The General Rule is that for tax purposes, the deceased’s estate is valued at the point of death. Tax must be paid within 6 months of death. Thereafter,
interest accrues.

What part of my estate is taxable?

The deceased’s taxable estate is the gross value of the estate immediately before death plus lifetime gifts made within 7 years but less exempt gifts. Annual gifts up to £3,000 per donor are exempt. Note that an interest in joint property forms part of the taxable estate. If the deceased has a lifetime interest in a trust, he is treated as owning the whole of the property in the trust for tax purposes. If the deceased lived in the property that he formerly owned, the whole of the property is usually regarded by the revenue as forming part of the estate for inheritance tax purposes.

Inheritance tax thresholds

No tax is payable on the first £325,000 of the deceased’s estate. This tax-free threshold applies as at 2010/2011 but is subject to change annually, visit
www.hmrc.gov.uk for up to date figures. Above that amount, the estate is taxed at 40% except in relation to lifetime transfers to and from certain trusts which are taxed at 20%

Exempt inheritances

A distinction needs to be made between exempt inheritances and inheritances which are subject to relief because the nil rate band (£325,000 in 2011) does not overlap with exempt inheritances for the purpose of calculating the taxable estate (see, for example what we say about tapering relief below).

The inheritance of a spouse who was domiciled in Northern Ireland or the UK at the date of the deceased’s death is exempt from inheritance tax and does not count as part of the taxable estate. The first £55,000 of a gift to a spouse living abroad is also exempt. Gifts to U.K. registered charities; U.K. Political parties (which have a representation in the House of Commons) and museums are also exempt.

Assets which are subject to relief

Subject to some exceptions, businesses owned by or shares in Companies relating to Businesses run by the deceased, are subject to relief up to 100% Owner-occupied farmland and tenancies as well as certain let farmland are subject to relief up to 100%. A farmhouse will qualify for agricultural relief provided it is in the same ownership form as the farmland and has been in existence for more than 2 years. There are tests as to whether a property is a farmhouse, such as historical association, geographical comparables and financial viability. Recent case law suggests that the following factors will tend to improve the prospects of a dwelling house qualifying as a farmhouse for agricultural relief:
(1) there is a long history of agricultural use associated with the building
(2) that the farm business is profitable.
(3) Farm buildings immediately adjacent to the dwelling house.

Obviously, each case is decided on its own merits. If you think your home could sell without the land as a valuable asset, it may be that it would not have the benefit of agricultural relief. Specific Advice should always be taken on the availability of any reliefs.

Tapering relief

Any asset which is given by the deceased to somebody less than 7 years before the deceased’s death forms part of the deceased’s estate for tax purposes. Tapering relief is available in respect of a gift which is made between 3 and 7 years of the deceased’s death on the following scales:

Tapering relief is only going to be of significance if the total gifts, which can be subject to tapering relief, are greater than the nil rate band, i.e. greater than
 £325,000

How can the impact of Inheritance Tax be reduced?

It is important to plan the passing of your assets so as to minimise the tax that your beneficiaries have to pay.

Step 1: Consider whether it is realistic to expect that your estate might be subject to inheritance. If you can think of no scenario where
your estate could be greater than £325,000, then the chances are that your estate will not be subject to Inheritance tax.

Step 2: Look at the reliefs available. If you own farmland then the 100% agricultural relief could be of considerable significance.

Step 3: Look at dividing up your property to use all available tax-free thresholds. The prospect of a husband and wife dying at the same time or within a month of each other can be anticipated with appropriate will planning and division of assets so that there is effectively two estates which separately take advantage of the nil rate band.

Step 4: Consider lifetime gifts, particularly if you expect to live longer than 7 years but balance this with potential capital gains tax liability and priority you make with regard to the loss of control over your assets. Consider discretionary trusts to minimise this loss of control

Step 5: Consider insurance products. Consider, for example, an insurance policy to enable the estate to pay Inheritance tax on your death. Another example is in the planning of pension schemes. You may wish to avail yourself of a product which deems the fund accumulated as not being part of your estate. In that case, the pension trustees pay the beneficiaries nominated in the policy. A discussion of the various insurance devices available is outside the scope of this leaflet and you would be recommended to take advice from somebody professionally qualified to give independent financial advice.

Disclaimer: The information herein is intended as a general guide only. No responsibility is accepted for errors or omissions howsoever arising.