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5 Common myths about inheritance

Are you sure you know exactly who will inherit from you and whether your family will have to pay inheritance tax? There are a few common myths about inheritance. We look at some wrongly held beliefs more closely, so you have a better awareness around estate planning.



Are you sure you know exactly who will inherit from you and whether your family will have to pay inheritance tax? There are a few common myths about inheritance. We look at some wrongly held beliefs more closely, so you have a better awareness around estate planning.


Myth 1: When I die my estate will automatically go to my family


If you are married or in a civil partnership and have a Will, you will usually inherit your home, partner’s estate and their personal belongings. If your partner dies intestate (without a Will), then you would inherit the first £322,000 of their estate, any joint assets and their personal belongings. Anything above this amount would be divided 50/50 between you and your partner’s children.


If your partner doesn’t have any children, then you will inherit everything. As marriage or civil partnerships can supersede a Will, you could risk disinheriting your own children when you die. There have also been cases where an ex-partner has inherited from someone because a divorce or dissolution has never occurred.


Myth 2: Common law marriage


There’s no such thing as a 'common law' wife or husband. If you’re cohabiting and you are unmarried or not in a civil partnership, then you won’t automatically inherit from your partner.


Unmarried partners can only inherit if they are named as a ‘beneficiary’ in their partner’s Will.


Always update your Will after a big life event such as a relationship breakdown or marriage. If there is no Will, this means that someone you may not wish to benefit from your estate could stand to inherit. If you have a blended family, things can get complicated.


Myth 3: Only the wealthy pay inheritance tax


When someone dies and the remaining estate is worth more than £325,000, this could be liable for inheritance tax (IHT). Tax is usually charged at 40% on any amount over this threshold. If you leave 10% to a charity, however, IHT can be reduced to 36%.


Unless there is a surviving spouse or civil partner, property is usually included within someone’s estate. As the average UK house is currently valued around £264,000 (April 2024), many families find they have to pay tax on a loved one’s estate.


There are a few exemptions to this rule. First, the inheritance tax threshold would increase up to £500,000 if you give your home to a direct descendent (child, grandchild, adopted or stepchild), not including a Trust. In some cases, there may also be possible exemptions including Business Relief or Agricultural Relief. If you need advice on your estate, please speak to our specialist solicitors.


Myth 4: Reducing inheritance tax by gifting


Many people wrongly believe they have offset inheritance tax (IHT) because they have gifted a large sum of money to another family member. However, the 7-year rule will apply, and tapered tax relief may apply to a gift.


Myth 5: I can write my own Will


Although you could technically write your own Will, unless it follows certain principles, has been witnessed and legally checked, it may not be valid. When someone dies without a valid Will, the rules of intestacy will apply. Therefore, it’s essential to make sure you have an up-to-date and legally binding Will if you want the people you choose to inherit from you.


When people attempt to write their own Will, they often make mistakes, which is why it’s advisable to use a Wills and Probate solicitor. For more information, please see our blog What happens if you don’t make a Will?

 

The importance of making a Will


Making a legally binding Will is the only way to ensure disinheritance issues do not occur in the future. If you are a cohabiting couple, a Will helps to protect your partner’s future financial situation. Wills should be reviewed each year and updated after a change of relationship status, a death or the birth of a new child.

 

Our Wills, Trusts and Probate solicitors offer sympathetic and caring advice on a range of inheritance matters. We can write your Will and set up Trusts to protect your estate. We will also check for any potential disinheritance concerns. Our aim is to help you protect your legacy, and to ensure your estate goes to the right people when you die.


If you need advice on an inheritance matter, please get in touch or email: lbacon@shbsolicitors.co.uk to arrange a face-to-face or telephone appointment.

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