Lloydbowmaker

THE IMPORTANCE OF MAKING A WILL

WHAT IS A WILL?

A Will is a witnessed document which sets out your wishes as to how you would like your possessions and assets to be dealt with following your death. It is important to make a Will at any age as it allows you to direct what happens to your possessions and assets (known as your 'estate'). A Will ensures that those whom you care for are looked after and your affairs can be dealt with smoothly after your death. If you have children under the age of 18 or other dependent relatives then a Will is crucial to ensure that adequate provision may be made for them. A will allows a parent to appoint appropriate Guardian/Guardians of minor children.

WHAT HAPPENS IF YOU DIE WITHOUT MAKING A WILL?

If you do not make a Will you may benefit someone unintentionally or not take care of someone as you intended. A Will ensures that your wishes are expressed and your dependents, which may include young children, are looked after your death. If you die without having made a Will then you are said to have died 'intestate'. The law provides that your spouse or civil partner is entitled to your entire estate if there are no children, from that or any previous relationship. If you leave a spouse or civil partner and children, then your spouse or civil partner is entitled to two-thirds of your estate and your children are entitled to one-third, which is shared equally between them if there is more than one child. It may cause difficulties if children particularly minor children (under 18 years) acquire a one third say of say a Family Home on intestacy. A minor does not have legal capacity and if any such children are minors then trustees would have to be appointed to deal with their entitlements. If you have neither spouse, civil partner nor child, then your parents are entitled to your entire estate. If both parents are deceased then your brothers and sisters are entitled to share your estate equally. If any of your brothers and sisters has died before you leaving children, then those children (your nieces and nephews) are entitled to take their deceased's parent's share of your estate. In the event that your parents are deceased and you are not survived by any siblings, nieces or nephews then cousins, aunts or uncles may have an entitlement.

WHAT HAPPENS IF YOU DIE HAVING MADE A WILL

If you die having made a valid will then you are said to have died 'testate'. If you die testate, then estate will be distributed in the way you set out in your will, subject to certain minimum shares for spouses or civil partners. Children have no absolute right to benefit from a parent's Will but they do have an entitlement to challenge a Will.

EXECUTORS

It is the job of the Executor or Executors you named in your will to make sure that your Will is dealt with as you wished. It is the obligation of the Executor(s) to deal with your estate which includes getting formal legal permission from the Probate Office of the High Court by means of a document called a Grant of Probate.

THE REQUIREMENTS OF A VALID WILL

For a will to be legally valid, the following rules apply:

  • The will must be in writing
  • You must be over 18 (or have been married)
  • You must be of sound mind
  • You must sign or mark the will or acknowledge the signature or mark in the presence of two witnesses.
  • Your two witnesses must sign the will in your presence
  • Your two witnesses cannot be people who will gain from your will and they must be present with you at the same time for their attestation to be valid. The witnesses' spouses/civil partners also cannot gain from your will.
  • Your witnesses must see you sign the will but they do not have to see what is written in it.
  • The signature or mark must be at the end of the will. These are legal requirements and if any of them are not met, then the will is not valid. You may change your Will and make a new Will at any time; a Will is of no force or effect until such time as you die.

ASSETS WHICH CANNOT BE BEQUEATHED IN A WILL

Certain assets cannot be disposed of by will. Some examples are:

  • property owned as joint tenants, which passes to the survivor by right of survivorship
  • credit union accounts where there is a nomination in place
  • certain life insurance policies. It is important to give your solicitor details of the types of assets which you have so he/she can give appropriate advice regarding your will.

TAX IMPLICATIONS

Capital Acquisitions Tax (CAT) is a tax which is payable on gifts and inheritances. Inheritance tax may have to be paid on an inheritance inherited on the death of any person, whether under a Will or on intestacy. Under the current tax rules, gifts and inheritances between spouses are exempt. There are also special provisions for civil partners but 'co-habitants' or 'partners' are treated as strangers for tax purposes. Making a Will and taking advice regarding CAT would allow you to make a more tax efficient Will.

TAX FREE THRESHOLD

If you leave property by Will to someone other than a spouse, or when someone other than a spouse benefits from your estate on intestacy then the first portion, known as the tax free threshold, is taken free of tax. The amount of the tax free threshold depends on your relationship to the person taking the benefit and will also depend on whether any other benefits have been received by them. There are three classes of tax free threshold. The largest threshold is available to those falling into Group A – which includes children, a minor child of a deceased child and in certain circumstances foster children or a parent. Group B includes brothers or sisters, nieces or nephews, grandchildren and in certain circumstances parents. All other persons fall into Group C and this would include for example – cousins and persons who do not share any blood relationship with the deceased. Tax free thresholds are updated annually and usually following that year's budget. Details of the threshold amounts for the current year (effective from 7th December, 2011) are as follows:- Group A - €250,000.00 Group B - €33,500.00 Group C – €16,750.00 The amount of tax free threshold available is determined by the date of death of the person from whom the beneficiary is taking a benefit. For deaths prior to 7th December, 2011 different figures will apply. It must also be remembered if a beneficiary has received other gifts or inheritances since 5 December 1991 they are added together (aggregated) according to certain rules relating to the date on which the gifts were received and from whom they were received. The effect of this may be to reduce or remove the tax free threshold available. If aggregation does apply, then the tax implications may be severe and professional advice should be sought.

WHAT HAPPENS AFTER THE TAX FREE THRESHOLD IS USED UP?

Inheritance tax is paid on the balance of the inheritance at the rate that applies on death. With effect from 7th December, 2011 inheritance tax is payable at the rate of 30%. For deaths prior to 7th December, 2011 different rates applied.

VALUATION DATE

The date for payment of inheritance tax (the valuation date) depends on the circumstances of each case. The valuation date determines the value of the assets subject to tax, the timing for the payment of the tax and the timing for the filing of the tax return. Where the valuation date is between 1 January and 31 August, the pay and file date is on or before 31 October in that same year. Where the valuation date is between 1 September and 31 December, the pay and file date is on or before the 31 October in the following year. Interest and surcharges for late payments may apply. Save in certain very limited circumstances returns must be filed online through the Revenue's online ROS system.

ARE THERE ANY TAX RELIEFS AVAILABLE?

Certain reliefs are available dependent on circumstances and we would be pleased to discuss with you whether any such reliefs may be available to your estate. A well drafted Will which takes into account your personal circumstances and those of your family members may have the effect of minimising inheritance tax payable by your beneficiaries. Wills should be reviewed regularly and at least every few years as they may need to be updated as circumstances, assets and taxes change.

E-mail colin.mulhall@lloydbowmaker.com or Telephone 023 8843400