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Who inherits your estate?

  December 11, 2015    Investments,Taxes    Author

Before you make your Will, you’ll need to spend some time thinking about your estate. Who do you want to remember, and how? Who can you trust with responsibilities, like caring for children or running a business? And what situations do you want to avoid? You won’t want the things you value falling into the wrong hands.

If you pass away before making your Will, the courts will make these decisions for you. That’s far from ideal – so here are some points to consider as you plan your estate.

Beneficiaries
In the 21st century, the family unit is a complex matter. Second marriages, step children, half siblings, co-habiting and family rows can add all kinds of complications when it comes to inheritance. So whatever your situation, you’ll need to set the rules for your estate.

For example, if you have children and step children, do you treat them equally? If you have children who live with your former spouse, who controls their money before they reach adulthood? If you co-habit, do you want your partner to inherit before your family? And if you’ve fallen out with a family member, do you want to block their inheritance?

You should weigh up these issues carefully, because your decisions will impact on your family long after you’ve gone.

Forced Heirship
If you’re domiciled in Scotland – or you own assets there – your spouse and children will be classed as ‘Protected Heirs’. In other words, they’ll have an automatic right of succession – at least to the portion of your estate that lies north of the border.

This right, known as Forced Heirship, allows a Protected Heir to appeal against a Will if they receive less than their protected share. The Courts will usually rule in their favour, so you’ll only have the freedom to share a small portion of your estate beyond your immediate family.

Similar laws apply in other parts of the world, including France, Switzerland and many Islamic countries. So if you own assets around the world, this could impact on your estate.

Of course, in most cases Forced Heirship is academic, because most people choose to leave their estate to their spouse or children. But sometimes, complications set in. For example, you and your spouse may be estranged but still legally married. Or you may not want an irresponsible relative to inherit a business.

If that happens, your best option is to transfer your assets into an offshore company, with shares to be settled in a trust that’s governed in another country. This will bypass Forced Heirship laws and give you the freedom to plan your estate, your way.

Intestacy
If you die before you make a Will, your estate will pass along your family line. Your spouse will be first to inherit, followed by your children and grandchildren. If you have no descendants, your estate passes back up the family tree: first to parents, then to siblings and their descendants, then to grandparents, aunts, uncles, cousins and more distant relatives.

This means that your spouse and children have automatic rights, even if there is no Will. However, if you’re resident in a different country when you die, they’ll face a long and expensive legal process. And even then, they could forfeit a large portion of your estate, then take an equal share of what’s left.

By making a Will now, you can spare your family the cost and uncertainty of dealing with the local Courts. You’ll also be free to specify where your money goes if your Beneficiaries can’t inherit. If you’d sooner remember a friend, or a worthy cause, ahead of a distant relative, it’s vital that your wishes are clear and indisputable.

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