Following the chancellor’s Budget back in March, the government’s “tax day” passed with very little fanfare and few significant changes. One announcement, however, did signal good news for those dealing with Inheritance Tax (IHT) liability on a deceased’s estate.

The announcement follows one of the recommendations made by the Office of Tax Simplification (OTS) in its 2019 report. It is intended to cut red tape, lessening paperwork for the bereaved at an already stressful time.

But what are the new rules? When do they come into force? And what do they mean for you?

Dealing with a deceased’s estate can affect emotional wellbeing

Probate specialist Exizent’s Bereavement Index 2021 looked at the legal and financial responsibilities of handling bereavement. The report, released in April, found that dealing with finances causes mental health problems for 40% of the bereaved.

In total, 95% found the process stressful, with one in five stating that they had become “extremely stressed”.

It is not only the bereaved who acknowledge the problem – 88% of legal professionals think the process is “slow and inefficient”.

March’s “tax day” announcements will hopefully lead to improvements in this area.

Red tape cut could lessen paperwork for 90% of estates

The government used “tax day” to announce that it would “reduce administrative burdens” for those dealing with Inheritance Tax.

The changes are due to come into force from 1 January 2022. They will mean that more than 90% of non-taxpaying estates will be saved the need to complete lengthy, complicated, and stressful paperwork.

In its 2019 report, the Office of Tax Simplification (OTS) issued several recommendations. Taking some of the report’s recommendations on board, the government also announced changes to regulation for IHT submissions where the deceased wasn’t domiciled in the UK.

Applying to deal with a deceased’s estate

Dealing with a deceased’s estate can be difficult but HA&W can help.

The way you apply will depend on whether there was a will in place at the time of death.

If there was a will – and it names you as an “executor” – you can apply for a grant of probate. Be aware though, that if the deceased is your spouse, you’ll inherit jointly held assets automatically and might not need to apply.

If you do need to apply, you may have to pay some of the IHT due. There will also be fees to pay. If you are unsure whether you need to apply or are concerned about any payments due, speak to HA&W. We can answer any questions you have.

If there is no will in place, an “administrator” needs to be appointed. You must be over 18 to be appointed as an administrator and you’ll usually need to be the deceased’s closest living relative.

If the deceased was your partner, but you were not married or civil partnered at the time of death, you cannot apply to be an “administrator” and you’re not automatically entitled to any of their estate.

Speak to us if you are unsure of your rights as an unmarried partner.

The importance of leaving a will

A will allows your estate to be distributed in line with your wishes

Having a will in place is the simplest way to ensure that your wishes are carried out on death.

If you pass away without a will in place – referred to as “dying intestate” – you forfeit control over how your estate is distributed. Instead, the laws of intestacy are used to determine where your assets go.

Blood-relatives and spouses normally inherit, but this might not align with your wishes and could mean others, such as a cohabiting partner or stepchild, miss out.

Having a will in place could help reduce stress for those you leave behind

Dealing with bereavement is traumatic, but, as we have seen, the additional stress of complicated paperwork could affect your loved one’s mental health.

Not only does a will make the process of being granted probate easier, being clear about how you want your assets distributed should help avoid family disputes at a time when emotions will be running high.

A will gives you peace of mind

Knowing that your will is in place and that your assets will be distributed in accordance with your wishes will give you peace of mind.

Not only can you ensure your loved ones are looked after, but you’ll be confident that you have done all you can to help mitigate stress.

Lastly, remember that having a will in place isn’t enough. You need to keep it updated too. Many factors and life events can change your priorities and mean a will needs updating. Check in with it regularly to ensure it still aligns with your wishes.

Get in touch

Estate planning is a crucial part of your long-term financial plan. That means thinking about how much you want to leave behind to loved ones and how you want your assets to be distributed.

We recently looked at the three financial benefits of marriage and how to make the most of them and this especially highlighted the need for a will if you cohabit with someone you are not married to or have stepchildren.

Cohabiting partners and stepchildren do not inherit under the laws of intestacy so putting a will in place could give you peace of mind. If you don’t have will in place – or it is not up to date – get in touch now.

Please contact us to find out what our financial planners can do for you, or to book in your regular review.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.