Our Bequeathed Wills include a provision as standard that if a beneficiary dies within 30 days of your death, that person will be treated for the purposes of your Will as dying before you.
Advantages
There are two main reasons why this is the default provision.
Firstly to avoid the first estate passing through the probate process twice in quick succession, which would otherwise result in increased administration costs.
Secondly, to impose some control over the eventual destination of assets. This control is only minimal as the named beneficiary only needs to survive you for 30 days to benefit.
Disadvantages
However, including the survivorship provision can also have inheritance tax disadvantages for instance, if a couple were to die together in an accident and it is impossible to tell who has died first. In this situation, the law says that the older partner is deemed to have died first.
If the survivorship clause is left in the Will of a married couple/ those in a formal civil partnership and the second spouse dies within 30 days of the first spouse, then spousal exemption for inheritance tax purposes will not apply.
So, in this example, the first spouse’s estate will pass in accordance with their Will, with the assumption that their spouse predeceased them; and so their estate will only benefit from one tax free allowance of currently £325,000. The second spouse to die will then have an estate that will also pass in accordance with their Will and again will only have their individual tax free allowance of £325,000. The spousal exemption allowance will not be available to be used/ transferred to the second spouse's estate therefore a tax free allowance of £325,000 has in effect been wasted.
Therefore, in Wills with a married couple/ couple in a civil partnership are wishing to leave their whole estate to each other in the first instance, the survivorship clause should be removed to ensure that the inheritance tax allowance can be transferred to the survivor, spousal exemption will apply and the tax free band is not wasted.
Tax and the impact of a survivorship clause within a Will and when it is relevant/ should be used and not is rather complex. Legal advise should always be obtained.