No point in splitting heirs

Although the manner of her death was as rare as it was tragic, Jill Dando was like about one in three people in both England and Ireland - she died without making a will.

This can lead to difficulties for the family members who survive, and particularly so for a cohabiting couple, with or without children. If they do make a will, they need to be well aware of their vulnerability to inheritance tax. Even married couples may find that their wishes for their assets, usually mainly the family home, will not be met if they do not make a will, warns Dublin solicitor Kieran O'Mara.

According to Irish law, when one spouse owns the property in his/her name only and dies without making a will, the surviving spouse inherits two-thirds of the property and the children one-third. This may be awkward for the surviving spouse if, for example, a man had the family home in his name, he dies, his wife does not work outside the home and the children are grown up and self-supporting. Such a division of assets may not be sufficient to allow her to remain in the family home.

"In a typical will in such a situation everything is left to the spouse, and he or she is made the executor, with the proviso that if the spouse dies first everything then goes to the children and there is a nominated executor," says O'Mara. Children who are minors do not inherit directly. Their inheritance is administered by a guardian, who is nominated by the parent in a will or - in the absence of a will - appointed by the court.

If a person is single all the assets go to the next of kin. If he or she has children they are the first inheritors; otherwise the assets go to the parents or a parent. If the parents are dead they go to the siblings, then to other, more distant relatives.

One category of people who do badly from this is cohabitees. If a couple cohabit, unless they own the house and other property jointly, the surviving partner has no claim on the property if one of them dies.

Even if they do make wills there are difficulties. Under the law they are "strangers in blood" and may only inherit £12,000 before becoming liable for inheritance and probate tax. Probate tax is two per cent of the net estate, while inheritance tax rises from 20 per cent of the first £10,000-worth, to 30 per cent of the next £30,000, up to 40 per cent of the balance.

Given that an average family home in Dublin is now worth £200,000 - £300,000, a cohabitee who is bequeathed the home alone could find him or herself liable for inheritance tax of more than £15,000. He or she would have to pay 40 per cent of any other inherited assets in inheritance tax.

O'Mara advises people who are cohabiting and who have property in only one of their names to regularise their situation. "There has to be a point in having a law of marriage," he said. "It confers legitimacy on the relationship. You could have a situation where people were cohabiting for up to 20 years, who have children and a house in common. Their share of the house would carry a huge tax burden for the surviving partner."

Apart from divorce and remarriage, one way of avoiding this is to leave the house to the children, if there are children, and nominate the surviving partner as executor. But this demands making a will. If no will is made, the surviving partner has no protection.

Spouses may inherit an unlimited sum without falling liable for either probate or inheritance tax. Under Irish law, a parent or child can inherit almost £200,000 before becoming liable for inheritance tax - provided it is their first inheritance. More distant relatives may only inherit about £20,000.

According to the Probate Office, about 70 per cent of the transfers of assets which pass through it involve wills. In the remaining 30 per cent the owner of the assets has died intestate and the property must be reassigned according to the Succession Acts. This is an improvement since the mid-1960s, when about half those who died did not have wills.

A spokesman for the Probate Office has noticed an increasing tendency for married couples to own property jointly. This means that the surviving partner automatically inherits the property without it going to probate. It is not known how many people die leaving no, or negligible, assets not requiring probate. "It costs only £60 to make a will," adds O'Mara. "About the cost of going to the dentist. Yet a lot of people don't. They feel it's almost like committing suicide."

Inheritance law is a complex area and it is advisable to consult a solicitor for advice