How money can tear your family apart
With almost half of all marriages ending in divorce, family arrangements are getting increasingly complicated.
But, while death can put an end to many family feuds, lax financial planning and sloppy will-writing can be the catalyst for even more hostility if they result in a fight over the deceased's estate.
"Death takes the lid off all sorts of family resentments," says David Charlesworth, partner at Moore Blatch solicitors. "Not a week goes by without someone ringing us up to find out how they can get more money from a will. We even had one person who wanted to claim petrol expenses for attending his own father's funeral."
The courts are also seeing more people prepared to fight over the family silver. There were 262 will disputes in the courts in 2009, more than three times the number seen in 2005. And, with many cases settling before they reach court, this is only the tip of the iceberg.
Even the simplest of situations can cause problems. Take Sophie Marsh, a 56-year-old widow from Salisbury. When her husband Grant died suddenly, she assumed everything would pass automatically to her as they had no children. But, as Grant hadn't written a will, the rules of intestacy were applied.
"Although we owned our home in joint names so it passed straight to me, he had around £700,000 of investments in his own name. Not long after the funeral my solicitor contacted me and said one of Grant's brothers had contacted him to find out when he'd get his share. I couldn't believe it," she says.
When kids are involved
The potential for family conflict is ratcheted up a few more notches when children are involved.
Whether from a previous marriage or the current one, a child of the deceased can demand their share of the estate. This is also the case for illegitimate children, which can be very distressing if the grieving family didn't know they existed.
Terry Hill, manager of executor and trustee company The Fry Group, explains: "Under the Inheritance (Provision for Family and Dependants) Act 1975, anyone who was dependent on the deceased can make a claim if they feel they've been overlooked in the will. It doesn't make any difference if you cut them out of your will."
Neither does it matter if you haven't seen them for years. In the recent case of Ilott v Mitson, 50-year-old Heather Ilott successfully made a claim against her mother's will, which left the £486,000 estate entirely to charity.
"Her mother had cut her out of her will after they fell out when she was a teenager; although they'd only seen each other once or twice in 30 years, as Heather is a mother of five living largely on benefits, she was able to claim the will did not make reasonable provision for her," explains Hill.
It can get even more complicated where a couple both have children from previous relationships. Unless your wills are set up correctly, it can often come down to who dies first.
Malcolm Skinner, a solicitor from LexisNexis, explains: "If you don't make provision for both sides of the family, everything can pass to the surviving spouse on first death and then to their children on second death, completely ignoring the children of the person who died first."
Beware the bitter ex
For even more explosive battles over the deceased's estate, throw in an ex-spouse, especially a bitter one. Just like a child of the deceased, unless they've remarried or a clean break order was granted when they divorced, they can also make a claim on the deceased's estate.
"You do have to be incredibly careful if you separate or divorce," says Skinner.
"The classic scenario sees a man living with his new partner after his marriage has failed. When he dies, because he hasn't divorced or written a will, it all goes to his former wife and any kids. This could mean the new partner losing their home."
Exactly this type of tussle is happening in the courts at the moment over the estate of millionaire estate agent Chris John.
When he died suddenly in September 2008 at the age of 47, he had been separated from his wife for more than seven years and was living with his girlfriend. He had no will but, perhaps because of the size of his estate, both his wife and his girlfriend produced fake wills to stake their claim.
While the added complications of fake wills means this case is still going through the court, even with a genuine will, there's still a chance that an ex-spouse could challenge it.
Hill says there are no hard and fast rules as to who gets what, but adds that the courts follow some guidelines when there's a challenge: "If you're separated, your spouse is likely to get what they would have received if you'd divorced rather than if you'd died," he explains.
And, although it may seem that avoiding marriage and parenthood altogether could make life after death simpler, this also comes with complications.
"Married couples, and those in civil partnerships, can pass assets to each other inheritance tax-free on death but this isn't the case for unmarried couples," explains Ian Porter, head of wealth management at Alexander Forbes.
"This means that if your estate is greater than the nil-rate band (£325,000), any excess will be subject to IHT at 40%."
Careful financial planning can reduce the size of this bill. This could include dividing assets between yourself and your partner so both of you stay within the nil-rate band, or, if more significant amounts of money are involved, using trust arrangements and IHT-exempt investments such as enterprise investment schemes to take the money out of your estate.
Indeed, whatever your family circumstances, legal professionals say there are ways to reduce the chances of your will kicking off a row that divides your family for generations.
"If you're doing something different, like leaving more to one child or giving money to charity, explain why in the will," explains Charlesworth.
"You might also want to tell them about your reasoning as this prevents any shocks."
The consequences of dying without a will
The possibility of someone challenging your will may make you wonder why you should even bother to write one in the first place. But, dying without a will, known as dying intestate, can cause just as many - if not more - problems.
Without a will, your estate is divided up according to the rules of intestacy. For example, in England and Wales, if you die without leaving a spouse or children, your estate passes to your parents or, if they're not alive, to any brothers or sisters. If there are no siblings or other relatives, the Crown or the Duchies of Lancaster or Cornwall will pocket your estate.
If you left a spouse and children, your spouse would receive £250,000, any personal possessions and a life interest in half the residue. The children would receive the other half equally.
"There's no need to die intestate," says Ian Porter, head of wealth management at Alexander Forbes. "A solicitor can write a will for you and, depending on your circumstances, this could cost as little as a couple of hundred pounds."
Once you've got one in place, he recommends regular reviews. "Every time you have a child, move house or get a promotion, think about how it affects your will and IHT planning. It's very easy to overlook new wealth and responsibilities," he adds.
If you die without making a will, your estate will be divided up and distributed according to a set of complicated procedures laid down by the law as set out in the Administration of Estates Act 1925. The more complicated your life, the more complicated the intestacy laws after your death. Given that 60% of registered deaths last year were intestate, according to Title Research, the only way to ensure your estate is divided according to your wishes is to make a will.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.