Making a will could save loved ones more heartache
Making a will is one of the most important decisions that you will ever take.
The absence of a will can lead to problems after our deaths. In the worst-case scenarios, it can create difficulties in providing appropriately for young children or vulnerable adults. It can also create rifts within families.
While the prospect of making a will may be daunting, the experience is usually painless. The starting point is the principle of testamentary freedom, meaning that we can provide for whomever we wish in our wills – although this principle is qualified by the legal right of a surviving spouse or civil partner to a share in the estate. While children have no corresponding legal right to a share in their parent's estate, it is possible in certain circumstances that children can take a legal claim against the estate of their parent after their death where they can show that they have not been properly provided for.
While a will enables you to decide who will inherit your assets when you die, it also allows you to ensure that your assets will pass to the next generation in the most tax-efficient way. The rate of inheritance tax has risen from 20 per cent to 33 per cent over the past few years. The tax-free threshold available to children, which was previously in excess of €500,000, has now been reduced to €225,000. As a result, even quite modest estates could give rise to significant inheritance tax.
It is therefore vitally important to do whatever you can to reduce the inheritance tax bill that your children, relatives or other loved ones face after you die. You can also take action now to ensure that tax can be paid in an orderly way to avoid any "fire sale" of assets by the beneficiaries of your estate to pay inheritance tax.
Here are nine steps that should help you get there:
* Make a will, enabling you to pass assets on to the next generation in accordance with your wishes and as tax-efficiently as possible.
* Consider including the wider family. Depending on the family situation, providing legacies for grandchildren or other relatives can give rise to a significant overall inheritance tax reduction.
* Consider lifetime gifts as these can be tax efficient – although the financial security of the parent is always the paramount consideration.
* Bear tax reliefs in mind. There remain generous reliefs from inheritance tax, particularly for business owners, but there are generally stringent conditions to be satisfied.
* In many cases, trusts can be an effective way of passing on assets tax-efficiently, on death or otherwise. Where inherit-ance tax arises, assets can be disposed of in an orderly way to meet the tax bill.
* Consider putting assets in joint names, which eases access to cash where one spouse dies. Otherwise, bank accounts in the sole name of an individual are frozen on death.
* Obtain local legal and tax advice for assets held abroad.
* Review your will periodically to consider if changes in circumstances, or tax laws, mean that the will should be revisited.
* Open lines of communication within the family. Where appropriate, and where children are sufficiently mature, this can assist in formulating a prudent estate plan, particularly in complex cases.
Cormac Brennan is a partner at O'Connell Brennan Solicitors
Sunday Indo Business