Given it is popularly reckoned that only about 30% of us have a meaningful will in place, why should we bother?
A general response might be that it all depends how concerned we are with what happens when we’re no longer around. Do we care what happens to our assets and how that impacts on our friends and family?
In fact, there are several good reasons for drawing up a Will:
We nominate trusted persons to act as our Executors. These people carry out our wishes from registering the death and arranging the funeral, through to valuing the estate, paying any due taxes and distributing the estate according to the wishes. No will means the intestacy rules apply and potentially an outsider will deal with matters, distributing along a prescribed route.
We can appoint Guardians to look after children under the age of 18. For many younger clients this is the driving purpose of making their first will. As new parents they believe there is nothing more important than protecting their children. They are aware that should anything untimely happen to both of them, with no will in place, further ‘outsiders’ in the form of a hard-pressed social services department will make decisions on behalf of the children, ultimately choosing who they live with and who is responsible for them. This is likely to cause distress to both the children and other family members. All this is avoidable by nominating suitable Guardian(s) in a Will.
We can include beneficiaries of our choosing. This might be friends and charities, beyond the family. The intestacy rules are totally prescriptive including assets for young children being distributed as soon as they turn 18. Most parents don’t wish their offspring to inherit until the age of 21.
We can arrange to distribute our assets as we wish. This may allow us to mitigate Inheritance Tax, possibly all together. The individual tax free allowance, or Nil Rate Band, is currently £325,000. This won’t change until 2021 at the earliest, so an estate worth more than that is likely to be paying some tax at 40%.
“It’s worth noting that in effect we all die with a will in place, either of our making, or the government-imposed Intestacy rules” says Nigel Tollit, Private Client Adviser from Castle Will Writers.
If we accept there are benefits in making a Will then who should be particularly looking to complete one?
Married couples. Marriage automatically revokes an existing Will, unless an included clause protects in relation to an intended marriage. Even when Wills have been drawn up they should be reviewed every few years, to ensure they remain fit for purpose. Potential executors can move away or die, beneficiaries can die or fall from favour or circumstances can change, like a need for tax planning, the establishment of trusts or a newly favoured charity.
Often, they are forgotten about, to the extent that no-one can recall where the original document is stored and in effect there is no will.
Married couples with children from different relationships. Whilst matters may be quite straightforward for a ‘nuclear’ family with a couple of children together, things can be more complicated when there are children from different parents and therefore different considerations and likely different wishes. Simple ’mirror’ Wills may not be appropriate in such circumstances due to a risk of ‘sideways disinheritance’, where the surviving spouse decides who benefits, potentially at the expense of the deceased’s child or children. The solution is likely to be via the use of more detailed, Trust Wills.
Co-habiting partners, of which there are 5.9 million in the UK, have an even greater need to get Wills in place. Marriage conveys certain legal protections not afforded co-habiting partners. Indeed, without a Will partners have few protections in place, since they aren’t recognised by the rules of intestacy. Assets would pass to children, parents and then siblings etc, etc. etc but not to partners. The cruellest scenario can see partners being asked to vacate the property they shared, to satisfy the family.
Divorced or separated individuals should create a Will, or a new Will. Many people mistakenly think that divorce revokes an existing Will, this is not the case. It may impact on who acts as an Executor or in terms of gifts however the Will remains valid. If a Will was in place, it’s highly likely that the choice of primary beneficiaries will change after divorce or separation!
Anyone wishing to protect their assets. This may be a general catch all to cover a variety of circumstances however it’s fact that without a Will there is no protection. Different types of Wills can satisfy the differing needs and help ensure chosen beneficiaries receive as desired.
“Inheritance Tax is a voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue!” Lord Jenkins.
A key part of any tax planning for inheritance is the provision of a will; this is the starting point for IHT mitigation, with a Deed of Variation as a fall-back position to make the best of the actual situation at the time.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.