A will, once executed, does not take effect until the testator (i.e. the person making the will) dies. On execution, no tax effects occur. However, on death the will takes effect and inheritance tax (IHT) may fall due on the deceased’s estate.
In practice, it is not unusual for a will drafted in lifetime to be changed and/or modified on a number of subsequent occasions prior to death. Such changes or modifications may be made for a number of reasons. For example: the birth of another child or grandchild; the marriage of a child; or acquisition of assets not owned at the date of execution of the will.
Changes or modifications do not cause the will to be revoked. Revocation cannot happen by accident, but only by deliberate act or by law. Revocation means the will is no longer valid and, failing execution of a new will, the intestacy rules kick-in.
Marriage
A will may be automatically revoked (in which case it is immediately no longer valid). The classic case of automatic revocation is where the testator marries after executing the will. It is possible for the testator to override such automatic revocation if he/she expects to be married to a particular person at the time of execution of the will and makes it clear that the will should not be revoked on marriage.
Divorce/separation
Perhaps surprisingly, on divorce no automatic revocation of the will occurs. However, although the will remains valid, any gifts made under it to the former spouse lapse and are then enjoyed by the residuary beneficiary(ies) or an alternative beneficiary(ies) as may be provided in the will. Separation has no similar effect.
Loss
If a testator’s will cannot be found after death there is a presumption that the testator destroyed it with the intention of revoking it (although this presumption can be challenged).
Destruction
Deliberate steps taken by a testator to destroy a will cause it to be revoked. Destruction may take a number for forms (e.g. shredding, burning). However, destruction means destruction. Thus, crossing out some words in the will does not revoke it.
Execution of new will
The execution of a new will, which contains a specific clause expressly stating that any earlier wills are to be revoked, of course revokes them. This is why it is very common to see a clause in a will along the following lines ‘I hereby revoke all former wills made by me’.
Revocation and tax effects
- Will execution
The execution of a will has no tax effect. This is because the will itself has no significance until the testator’s death. The property disposed of in the will remains the property of the testator (until death) as does any income arising from the property or any gains arising on disposal of any of the property.
- Death
On death, the executors of the will become liable to account for income tax on income arising thereafter on the deceased’s property and for any gains arising on any disposals made by them. In addition, they must account for any IHT due on the deceased’s estate.
- Revocation
With regard to revocation no immediate tax effects arise. Thus, for example, the burning of the will with the intention that it be revoked precipitates no tax consequences at the date of burning. However, possible tax effects on revocation on marriage or the collapsing of gifts to a former spouse on divorce need to be considered.
Prior to marriage IHT will, in principle, arise on the deceased’s estate; on marriage, such an IHT charge could be avoided by executing a new will under which all the deceased’s estate is left to the ‘new’ spouse or up to the nil rate band (£325,000 for 2014/15) could be left as under the original pre-marital will to the original beneficiaries with the excess left to the ‘new’ spouse.
On divorce, any gifts to the former spouse lapse, which typically means that such gifts fall into residue (for the residuary beneficiary(ies)) or, if the will so provides, to one or more beneficiaries. Under either scenario, the effect may be to precipitate an IHT charge on the deceased’s estate, which was not anticipated or intended. Gifts to a spouse are exempt from IHT but if, due to the divorce, the spouse no longer benefits but instead, say, the testator’s brothers and sisters take the gifts an IHT charge is likely to arise.
Practical Tip:
To avoid unexpected tax charges on death, make sure that following marriage and/or divorce you execute a new will.
