What if I've left cash to beneficiaries but in the end there's not enough cash left?

JB50MSE

I have 3 beneficiaries - my partner, and my 2 relatives. I have a will, and enduring powers of attorney for health/welfare and finances. My partner is my executor and my attorney. I own my flat with my partner (joint tenants, not married or in civil partnership), so after my death our flat will legally transfer to my partner only. I have £xK savings in ISAs, no mortgage, no debts, negligible goods and chattels. I'd like to leave £xK cash to my 2 relatives (a stated amount, not a percentage). At the moment I am compos mentis and in charge of my own welfare and finances. But I am getting older. What happens if in future I need care or otherwise spend all my savings before I die, or some or all of my cash savings need to be used to pay the inheritance tax, so there's not enough cash left? Would my partner have to pay the £xK stated cash to my two relatives, because my partner will become sole owner of our flat, whether or not there is any/enough cash left in my estate after inheritance tax etc is paid?

Keep_pedalling

If your estate is in IHT territory you should seriously consider marriage or civil partnership.

i believe if you have left them say £10k each  but your estate only has £10k left that their bequest would be reduced to £5k each.

JB50MSE

Thanks Keep-pedalling. Yes well, we've discussed marriage or civil partnership endlessly but we both would rather not, all things considered. There won't be much IHT to pay.

Mojisola

JB50MSE said:

I have 3 beneficiaries - my partner, and my 2 relatives.

I have £xK savings in ISAs, no mortgage, no debts, negligible goods and chattels.

I'd like to leave £xK cash to my 2 relatives (a stated amount, not a percentage).

What happens if ... there's not enough cash left?

If you don't want your partner to inherit any of the cash, just leave your money 50/50 to the two relatives.

If you do want your partner to get some of your cash, include him/her in the percentage split.

Sea_Shell

Have you accounted for all of your estate if it ends up being in excess of the legacy to the two beneficiaries?

As I understand it, if beneficiaries are left a specified amount in £££, then you need to make provision for the "residuary" estate after these have been paid.

That is why % splits are often easier.     (unless you're dealing which a charity, as they can be quite aggressive in maximising the estate if they are on a % basis!!! - but conversely if you leave a charity £££ then they might get the whole estate if there's hardly anything left)

getmore4less

THe issue here is the house.
if 1/2 that is over £325k  there is a IHT bill to pay and that comes from the residual estate unless there is not enough then the IHT becomes the responsibility of the joint owner

you could sever the joint tenancy and have the IHT bill paid by the beneficiary of the house.

Not sure if you can stipulate that for a joint tenancy something to look into 

Stubod

..as above, better to specify a "percentage" rather than an actual amount. We have done this as we have specified a number of charities.

Dox

JB50MSE said:

I have 3 beneficiaries - my partner, and my 2 relatives. I have a will, and enduring powers of attorney for health/welfare and finances. My partner is my executor and my attorney. I own my flat with my partner (joint tenants, not married or in civil partnership), so after my death our flat will legally transfer to my partner only. I have £xK savings in ISAs, no mortgage, no debts, negligible goods and chattels. I'd like to leave £xK cash to my 2 relatives (a stated amount, not a percentage). At the moment I am compos mentis and in charge of my own welfare and finances. But I am getting older. What happens if in future I need care or otherwise spend all my savings before I die, or some or all of my cash savings need to be used to pay the inheritance tax, so there's not enough cash left? Would my partner have to pay the £xK stated cash to my two relatives, because my partner will become sole owner of our flat, whether or not there is any/enough cash left in my estate after inheritance tax etc is paid?

Hopefully this wasn't a DIY will, but if you used a solicitor, these should have been points to be clarified/dealt with at the time the will was drawn up. If you aren't comfortable with the arrangements (and certain that you understand them), now might be a good time to update your will.

xylophone

The property will pass by survivorship  (not by will) but as the OP is not married to his co-owner/partner, the value of his share will be set against his death estate for IHT purposes.

To the value of his share in the property will be added the value of his cash/investments.

He says that he has made a will leaving specific cash legacies to  a couple of relations - presumably there is a residue clause  to cover any balance.

The partner is  his executor and will need to calculate the value of the estate after the payment of funeral expenses/debts etc.

If the value of the estate exceeds the nil rate band, then IHT will be payable before  any distribution from the estate.

If there is not enough to pay the specific legacies in full, then the residue clause becomes irrelevant
and the legacies are abated in proportion to the cash available.

If there is no cash, then the legacies cannot be paid.

The concern for the partner must be his/her financial position if the value of the deceased's share in the property is greater than the nil rate band and there is no cash left in the estate?

Emmia

JB50MSE said:

Thanks Keep-pedalling. Yes well, we've discussed marriage or civil partnership endlessly but we both would rather not, all things considered. There won't be much IHT to pay.

I'm intrigued that you've rejected marriage/civil partnership... My understanding is that the key benefit is that when the first one dies the entire estate passes to the other without IHT being payable - it's only paid when the other party dies, and at that point both nil rate bands can be used. This also avoids the surviving party needing to sell property etc., to pay the IHT bill.

Didn't Ken Dodd save a couple of million in IHT by getting married shortly (days) before he died? 

Either way round, I'd probably switch to a percentage basis for the bequests - which could be worked out on the basis of the sum you'd like to leave them vs. the size of your estate.