Farming Talk: Family farms at risk if wills are not made

Why make a will? A recent report has indicated that approximately a third of the people in Great Britain have not made a will.

This may be partly due to a commonly held misapprehension that everything will go to the deceased's spouse or civil partner if a will is not made.

In the event of dying without a will this situation is known as intestacy and special rules come into effect which many people are either unaware of or do not appreciate how they will apply.

As a very rough guide, in the case of intestacy if there are surviving relatives the spouse or civil partner will receive all the deceased's personal belongings, plus £250,000 and a life interest in a half share of everything else.

A life interest means the spouse or civil partner will receive the income but not the capital.

The other half of the residue will go to the children. Different rules apply if there are no children.

Two examples will assist:

Take an example of a husband and wife with two children – if the husband dies leaving £350,000 worth of assets (including his half share of the house) and if we suppose the children are aged 18 and 21, then the rules will provide that his wife will receive £250,000 and anything over that will be divided into two parts.

A sum of £50,000 will be held as a life interest for the wife to draw upon the income (ie interest/rent) and the other £50,000 will be left to the two children. The same rules would apply to civil partnership.

Another example might be the family farm which has gone up significantly in value due to the increase in land values – if the farm is worth £2 million and might be owned by the husband and wife jointly then the surviving wife would receive £250,000 and a life interest in half the residue, namely the interest or rent on £375,000.

The children aged 18 and 21 each share the £375,000 at probably what would be far too young an age leaving their mother struggling to continue with the farming.

In a worst case scenario the children could insist on receiving their cash leading to a sale of land.

The above demonstrates some of the risks of not making a will.

Making a will can legitimately avoid tax which may not need to be payable.

In the farming example, the husband's will might leave his share of the farm to discretionary trustees to hold for his wife and children with the object of ensuring the farm remains a viable commercial unit.

If a person dies without leaving a partner or any close relatives and not having made a will then everything will go to the Government.

Steven Corfield is a partner and agricultural specialist at Shropshire law firm, FBC Manby Bowdler LLP