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Wills - Case Study Number 4

This was an apparently simple situation which arose with a new client of Vantis WS who was introduced to us about three months before she died. Her previous advisors (both Solicitors and Accountants) seem to have ignored the long arm of the Inland Revenue.

What had happened was that ten years ago our client’s husband died leaving all his estate to his wife. This was not an uncommon situation and an easy way to avoid inheritance tax because it is not payable on transfers of assets between husband and wife.

Following her husband’s death our client redrafted her will with the local family Solicitor leaving everything to her three children to be divided equally when she died. All of the children were in their 30s and at the time it seemed a fair solution.

Two years ago when our client died the extent of the problem was revealed. The family home that was over 300 years old and had been owned by the family since it had been built was now worth £1,200,000. Our client had spent the last two years of her life in a care home and most of her liquid assets had been realised to cover the cost of care and all she left in cash was £25,000.

The youngest daughter had looked after her Mother until she went into the nursing home and still lived in the property with her 7 year old son.

The total estate was therefore worth £1,225,000 and after taking into account the tax-free band of £231,000 the inheritance tax liability was £397,600. Due to the size of the liability and the lack of funds to pay off a debt of this size, the three children were forced to sell the family home which caused a good deal of distress to all concerned and in particular the daughter who had given up several years of her life to care for her aging Mother and now had to find a new home with her young son.

Looking at the size of the figures involved this example may not illicit that much sympathy but with a certain amount of careful planning this situation could have been avoided.

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