Millions of Britons could be sleepwalking into inheritance tax bills, with experts warning that one common oversight may leave HMRC as the biggest winner from their estate.
New research reveals widespread confusion about wills and estate planning, with many wrongly assuming that simply leaving everything to a spouse or having a will in place is enough to avoid tax, delays, or disputes after death.
New research from Canada Life reveals widespread confusion around estate planning, with many people wrongly assuming that assets will automatically pass to loved ones without any complications.
In some cases, these assumptions could lead to HMRC receiving a larger share of an estate than intended. The findings show that 38 per cent of UK adults incorrectly believe that probate is not required if all assets are left to a spouse.
A further 33 per cent assume that if someone dies without a will, everything will still go to their family automatically.
Liz Hardie, Technical Specialist for Tax, Trusts and Estate Planning at Canada Life, said: "Whilst people generally seem familiar with some estate planning laws, there are still gaps in understanding.
"The easiest way to avoid potential pitfalls and ensure that your estate is distributed according to your wishes is to write a will and keep it up to date."
Inheritance tax can be reduced by giving gifts - but rules do apply GETTYShe explained that dying without a valid will means an estate is divided according to legal rules, not personal wishes.
Hardie said: "Making wrongful assumptions about these laws may lead to loved ones facing delays and longer probate, potentially higher inheritance tax bills, in addition to disputes amongst the presumed beneficiaries as well."
Despite the risks, earlier research from Canada Life shows that 44 per cent of adults in the UK have not written a will and are not in the process of doing so.
One in four people also believe a will is a one-time thing.
LATEST DEVELOPMENTS:
One in four people also believe a will never needs updating
GETTYHowever, major life events such as marriage, divorce, having children or the death of a beneficiary should all prompt a review.
Outdated wills can result in assets going to unintended people or create legal complications for those left behind.
The research also highlights risks for cohabiting couples. Many believe that living together is enough to ensure a partner inherits the estate, but under current laws, unmarried partners have no automatic rights.
Many couples forget that under the current succession laws, a cohabitee has no automatic rights under the intestacy rules and will not automatically inherit their partner’s estate when they die. So, a valid will is essential to make sure assets pass to the surviving partner as you would want them to.
Outdated wills can result in assets going to unintended people
GETTYExperts are urging people to take estate planning seriously and not to rely on assumptions.
Hardie explained that people can write a will themselves as long as someone witnesses the signing of it, or they can have a professional do this on their behalf.
Some charities also offer free will-writing services at certain times of the year.
