Making a Will
Many people worry unduly when it comes to making wills. They think they are going to die immediately after they make one. Rest assured that this is a rare enough occurrence.
You can make as many wills as you like in your lifetime, each one automatically cancels the earlier one.
Why make a will at all?
Well, if you don't, your property may go to people who have no interest in you - or you in them - or it may result in family disputes between a surviving spouse and children.
For instance, if you are single or widowed with no children and die without a will, your property goes to your parents. If you have no parents alive, it is divided between your sisters and brothers. If a brother or sister has died before you, his/her share goes to the children of that person.
So if you have no brothers or sisters surviving you, only twenty-two nieces or nephews, all you have is divided among them.
You might not want that so you should make a will to reflect your wishes.
If you are married and have no will and leave a spouse and three children, your spouse gets two-thirds of your property and your children one-third between them. This could lead to problems and disputes and cash flow difficulties if everyone looks for their entitlement. It stands to reason that you should make a will to prevent this happening.
You may intend to leave something to a charity or friend. You can't do so unless you write it down in a will - so, please make a will!
If you don't make a will, your survivors will have to take out a bond with an insurance company adding to the cost - so, make a will!
Nobody has an automatic right to any of your property except a surviving spouse. Regardless of what you say in your will, your spouse is entitled to one-third of what you have where there are children and half of what you have where there are none.
So, if you give your spouse anything from one-third to all of your estate, that is fine. If you give your spouse only 25%, the rest will have to be taken from the other people who benefit, to make it up to one third.
When making a will, you need to appoint an executor or executors. That person has the job of gathering your assets and ultimately distributing after a probate has been extracted from the High Court. A probate is the document which gives the executor authority to deal with your goods. A person benefitting from your will can be an executor (for example, a spouse, a child, a relative etc)
INHERITANCE TAX
From 7 December 2011, the Inheritance Tax thresholds (whereby a beneficiary can take an inheritance fee of tax) are as follows:-
1.€ 250,000 for a child or parent.
2.€ 33,208 for a grand-child, brother, sister, nephew or niece.
3.€ 16,604 for any other beneficiary.
The standard rate of tax is 30% in respect of inheritances and gifts taken on or after 7 December 2011.
In calculating Inheritance Tax, the net value of the Estate is the value that is forwarded to the Revenue Commissioners. In arriving at the net value, there are some items that are allowed but others are not. For instance, if reasonable Executor expenses would be allowed, but the cost of selling a house may not be allowed to set off against the calculation for tax, unless the Will specifically states that a house has to be sold.
For example, Posh, a resident of Ireland leaves her whole Estate to her only child, Brooklyn. The Estate is as follows:
Assets
House € 530,000
Other Assets (Bank Accounts Etc) + € 40,000
_________
€ 570,000
Less
- Liabilities € 25,000 (Including Funeral Etc)
- Executors Expenses - € 1,500
- Legal Expenses - € 11,000
- € 37,500
__________
Balance of Estate € 532,500
Calculation of Tax
Balance of estate = € 532,500
Less
- € 250,000 Threshold for a child
_________
€282,000 = Amount subject to inheritance Tax at 30%
Inheritance tax payable = € 84,600.
If there is a provision in the Will that the house is for sale, then the expenses of sale would be allowable. So, if estate agents fees and legal fees incurred in the sale of the house come to for example €5,000 plus VAT @ 23%, this would also be deductable from the net value of this estimate.
Any gifts since December 1991 are aggregated. In other words if you got a gift from an uncle or aunt of € 20,000 in 1993 and you got a gift from a grandparent of € 40,000 in 2012, then the total of the gifts is € 60,000, which is over the threshold of € 32,208 and tax is calculated on the difference. It is unfortunate that the start date (i.e., 5 December 1991) has not moved on.
For more information on drafting wills, inheritance tax or putting in place trusts or general estate planning, please contact Jim O'Higgins or Cormac Carty on 01 865 8800 or email info@kentcarty.com.