SURVIVORSHIP CLAUSES…GET RID OF THEM
Ever thought about ‘survivorship clauses’ in Wills? The ones that go like ‘I gift £200,000 to my wife if she survives my death by 28 days, otherwise it should pass to my children equally’.
However, should the surviving wife now pass away within 28 days, lo and behold, the £200,000 passes to the children. In doing so, the £200,000 doesn’t benefit from the transferable nil rate band which is only available to married couples and therefore results in the estate suffering a higher tax bill.
Survivorship clauses have traditionally been around to stop the double administration of the same wealth following deaths in quick succession. It used to make sense prior to October 2007, as before this date, you couldn’t transfer any unused nil rate band of the deceased spouse to the surviving spouse and set it against his/her estate on their death. It would make sense to use up the nil rate band on first death by passing it to default beneficiaries if the wife/husband failed to survive them by 28 days.
Furthermore, your choice of beneficiary could have been very different if you knew your first choice of beneficiary was to die soon after you. You may not be happy with your assets passing via their Will to beneficiaries you may not feel as strongly about.
What to do
Our position is to generally do away with the survivorship clause and on first death put everything into trusts. You can nominate trustees you have confidence in to distribute your wealth to multiple beneficiaries in accordance to your terms.
One of those trustees preferably being a professional trustee who is on call to advise the lay trustees on how best to access trust assets in light contemporary legislation.
Trust planning, offers protection against third party threats to your wealth your beneficiaries may face such as:
- Divorce settlement fees
- Creditor / Bankruptcy Claims
- Generational Inheritance Tax
- Care fees
It also goes without saying having independent professional trustees will also ensure your wealth doesn’t get whittled away by irresponsible beneficiaries!
DISCLAIMER: The content of this blog should not be taken in any way to be deemed applicable to your own personal circumstances. Pick up the phone, drop a suitable professional an email. If they get it wrong, you’ll most probably be covered by their PI cover. You wouldn’t do surgery on yourself, don’t do this…as it could cause you serious health problems and you may need to go into surgery.