Changes to statutory legacy 'may encourage complacency' about making a will

Financial Adviser Magazine – 18/09/08

How do I find out if my father-in-law left a will? He died in March 2006, leaving three houses and other assets. His widow, who is not the mother of his six children, told them that "their father did not leave anything for them."

The downside to the statutory legacy changes is that it may encourage a people to overlook the need to write a will, says Standard Life.

Changes to inheritance law affecting the statutory legacy could make people complacent about making a will, Julie Hutchison, estate planner for Standard Life, has warned.

The statutory legacy is the amount paid to a spouse or civil partner from the estate of a person who dies without leaving a valid will. From next February payments will rise from £125,000 to £250,000 for couples with children and from £200,000 to £450,000 for those without. The statutory legacy was last changed in 1993.

Ms Hutchison said the changes were "welcome" yet emphasised it did not negate the need to make a will.
She added: "Around half of people die without making a will. It is a welcomed change, however it is important to make a will because if you die without a will, legal fees are higher, you have to go to court to appoint an executor - a will removes all elements of doubt."

Anthony Coyte, head of investment steering group for AWD Chase de Vere, said if you died intestate then a person ran the risk of having money distributed among relatives randomly.

He added: "It is a good move because the rates have not changed in a long time. The key issue for individuals should not put themselves in the position where they are relying on a statutory legacy because it may not go to where they want it to go.

"Intestacy rules may mean not all of your estate would go to your spouse, in most cases you would envisage this happening, part of your estate may go to a statutory trust for your children. That means your partner may not have access to the full amount of capital.

"You then end up with a trust that you have to run - if you do not understand it - that will be costly because you are going to pay your lawyer to do it and pay tax returns."

Ms Hutchison also warned that the doubling of the nil-rate band is not automatic which was announced in last year's pre-Budget report.

She added: "Spouses and civil partners are now able to transfer their inheritance tax nil-rate band allowance and this affects the type of advice IFAs will give their clients."

© 2008 Associated Newspapers. All rights reserved
Date: 18/09/08
Publication: Financial Adviser Magazine