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Why Should I Make a Will?

• You decide what happens to your property on your death.
• You can appoint guardians and trustees for your minor children.
• You can change your will if circumstances change.
• It gives peace of mind.
• When making a will you can seek legal advice in relation to tax planning.

A will may be invalidated by the presence of duress or undue influence on the testator. In effect, this means that you cannot be forced into making or varying the terms of a will by outside and unfair pressure. If a Court establishes that a will was made under the influence of such pressures, it will be invalid.

Minor Children

If you have children under 18 years of age, it is crucial that you make a will to take into account their needs in the event of your death. A trust will can be designed to take into account the powers, duties and responsibilities of the Guardians and Trustees, who you will appoint to look after the day to day needs of your children together with their long term financial security. When your children become adults you can amend your will to take into account the change in circumstances.

Legal Right Share

The testator is generally free to dispose of his estate as he wishes, with one exception. There is a moral and legal obligation on the testator to provide for his spouse and children in his legacy. Under the Succession Act, 1964, the spouse and children of the deceased have a legal right to a share of the deceased's estate as follows:

Spouse:

• 1/2 share in estate if there are no children
• 1/3 share if there are children
• Can take the family home and contents in full or part satisfaction of the legal right share. This facility is available at the Courts' discretion.
• The legal right may be renounced by the surviving spouse.
• Gifts to the spouse during the testator's life can be taken into account.

Children:

A child can make an application to Court to claim a share in the estate if they feel they are not adequately provided for. If the Court is of the opinion that the testator has failed in his moral duty to make proper provision for the child in accordance with his means, whether by his will or otherwise, the Court may Order that such a provision shall be made for the child out of the estate as the Court thinks fit. It is clearly a judicial discretion and there are a number of points which the Court will take in to account.

• The position of all of the children of the testator and any circumstances which the Court may consider an assistance in arriving at the decision would be fair to the child applicant and the other children of the family.
• Any gifts given to the child during the testator's lifetime
• The testator's means,
• The number of other children, age of the child applicant and his or her financial position and prospects in life.

As a general rule, the older a child is and the more established and financially secure he is, the less likely they are to succeed in an action under Section 117.

Intestacy

If you die intestate, that is without having made a will, your estate will be divided according to the Succession Act, 1965. Your next of kin will be entitled to your estate as set out in the Act. Some of the more common scenarios are as follows:

• Spouse dies leaving surviving spouse and no children > Surviving spouse takes all
• Spouse dies leaving surviving spouse and children > Two-thirds to surviving spouse and one third equally to children
• Spouse dies leaving surviving children but no spouse > Children take equally, with share of predeceased child going to that child's own children.
• Person dies leaving no children or spouse, but parent or parents surviving > parents take equally and if only one survives, the surviving parent takes all.
• Person dies leaving no surviving children, spouse or parent > Brothers and sisters take equally, with share of predeceased brother or sister going to the children of the predeceased brother or sister.
• Person dies leaving no surviving children, spouse, parent, brother or sister > nephews and nieces take all equally.
• Person dies leaving no surviving spouse, children, parent, brothers, sisters, nephews or nieces > surviving uncles and aunts take equally and if there are no surviving uncles or aunts the estate is divided among first cousins equally.

If the surviving relatives are more remote than first cousins, a detailed family tree would have to be prepared to establish the correct distribution of the estate.

Taxation

The tax liabilities incurred on inheritance are a complex area of the law. The main tax which applies is Capital Acquisitions Tax (Inheritance Tax). Probate tax was abolished in the Budget of December 2000 and Probate tax now only affects estates where the date of death was between 17th June 1993 to the 5th December 2000.

There is no tax liability on gifts or inheritances between spouses. However, this applies to legal spouses only, and in some cases divorcees. Cohabiting couples may not take advantages of this feature.

Each gift made in a will has a tax-free threshold, depending on the relationship between the testator and beneficiary. For example, there is a higher tax-free threshold for a gift to a son or daughter than for a similar gift to a nephew. For these purposes, a partner or cohabitee is treated as a stranger, and accordingly the lowest tax-free threshold applies. The threshold increases each year in line with inflation. This year, the thresholds are as follows:

• Child £ 316,800
• Close relative £ 31,680
• Stranger £ 15,840

Once the threshold is used up, the remainder of the inheritance is taxed at a rate of 20%. There are, however, certain reliefs and exemptions. If the beneficiary is a niece or nephew who has worked in the testator's business for five years and the testator leaves the business to him, he or she may be entitled to the same tax-free threshold as a son or daughter. If 80% of the beneficiary's property consists of agricultural assets, then the beneficiary may qualify for agricultural relief and the value of the agricultural property inherited may be reduced by 90% for the CAT return. Likewise, if the beneficiary inherits business property, business relief may be claimed and the value of the business property inherited may be reduced by 90%. There are many other tax avoidance measures which would apply in particular circumstances.

While this is by no means a definitive guide to the subtleties involves in wills and estates, it is intended to assist you in picking up some useful information for estate and tax planning. A few hours and a little planning can keep thousands of pounds out of the hands of the taxman.

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