Cohabiting couples and step-families stand the chance to lose IHT benefits and estate to the Crown
The recent changes to inheritance tax rules have seen an increase in the tax-free amount that can be passed to family members. From April 6th, estates worth more than £425,00 or more are subject to a 40% inheritance tax, meaning that married couples and civil partners will be able to inherit each other’s tax-free allowance, and up to £850,000 can now be passed onto descendants tax-free.
However, according to employee benefits consultancy Lemonade Reward, the change in the inheritance tax rules will be of no benefit to unmarried couples or step-families if they do not have a will in place.
Only 47% of British parents with children have made a will – which means over half of British families will be forced to follow Rules of Intestacy which lists specifically who can benefit from the deceased’s estate.
The Rules of Intestacy exclusions discount:
- Cohabitants /unmarried partners
- Common-law spouses/ex-spouses
- Step-parents, step-children
- Close friends/carers
Over the last 20 years cohabiting couples have become the fastest growing family type and according to the Aviva Family Finance Report one in three people in the UK is now a step-child, step-sibling or step-parent: none of whom will have any claim on inheritance without a will in place.
David Pugh, managing partner at Lemonade Reward comments, “Not leaving a will causes distress and heartache for those left behind and this is compounded even further for the growing number of people who will find themselves unable to inherit the estate as they are excluded from the Intestacy list. Even the Crown takes priority over cohabiting couples and step-families, meaning your estate could end up in the monarchy’s coffers.”
“Employees who want their loved-ones rather than the Treasury to take control of their estate should make a will and have plans in place to meet their future financial goals; this will help accrue assets to pass onto the next generation.”