Re: Summer 2015 | Page 71

Rik Mayall’s Inheritance tax bill could be NO JOKE I was truly upset to hear the news that one of my favourite ever comedians, The Rik Mayall (as he liked to be styled) had died in June 2014 aged only 56. Star of such shows as The Young Ones, Bottom, Blackadder and The New Statesman, Rik was well-loved but, it seems, not so well-advised – he died without leaving a valid Will. Given that he had already looked death in the face in 1998 having suffered a major accident on a quad bike, with injuries including a fractured skull, that Rik did not have a valid Will is quite surprising, and could create some serious financial problems for his family because he had not taken steps to reduce the possible inheritance tax due on his estate. The lack of a Will means his estate will have to be dealt with under the intestacy rules and there may be a hefty inheritance bill to pay, as although the rules were updated slightly in October 2014, the new rules won’t apply to Rik’s estate. Rik was married to Barbara and had three adult children. If he had made a Will it could reasonably have been expected to say that he left everything to Barbara if he died before her, and then on her death, she will probably divide the estate (what she owns in her own right and what she inherited from Rik) between the children. For inheritance tax purposes, because gifts between spouses are free of tax, there would have been no tax payable on whatever Rik left to Barbara when he died. Barbara’s Executors could then apply on her death to bring forward his tax free allowance, or nil rate band, of (currently and at Rik’s death) £325,000 so that there was a threshold of £650,000 before tax was due. Barbara could also take other tax planning steps before she died to reduce the potential inheritance tax liability on her death, possibly meaning there will be no tax due at all. However, the intestacy rules as applied to Rik’s estate (estimated as being worth £1.2 million) will mean that apart from assets owned jointly with Barbara as joint tenants and which will pass to her automatically as surviving co-owner, all she can initially expect to receive will be £250,000 and his personal possessions. Everything over £250,000 will be split in two – half goes straight to the children and the other half is invested so that Barbara will only receive the interest or income earned on that share (a “life interest”), with the capital then also passing to the children on her own death. Had Rik died after the intestacy provisions changed in October 2014, the situation is almost the same, except there is no life interest so Barbara would receive all of her half share straightaway. The part of the estate passing to Barbara will be free of inheritance tax because she and Rik were married. But if the share going to the children is worth more than £325,000 then there will be a tax bill – inheritance tax is charged at 40% and quickly adds up. It may be possible for the family to vary the Will to redirect assets and reduce the potential tax liability (it worked for the Milibands) but this must be done with expert legal advice and it seems that the use of such Deeds is intended to be reviewed by the government in the future. Not having a Will also means that Rik did not have the chance to leave anything from his estate to his friends, more distant family members or charity, which many people like to do. Effectively, intestacy is the Government deciding who inherits your estate. If you don’t like the idea of that then the answer is clear – take professional advice and have a proper legal Will prepared. If you already have a Will, review it every now and then to make sure it is still up to date and valid and take action to make changes with the advice of your lawyer – it is not clear whether Rik didn’t write a Will or whether he left something that was invalid. Had he not been married to Barbara then the position would potentially be even worse for her as under the intestacy rules, she would not have been automatically entitled to anything they didn’t own jointly and may have had to go to Court against her own children for a share of his estate. Everything would have gone to the children and this would also have increased the potential inheritance tax bill even further. You may not be a world-famous comedian, your estate may no