Wills & Estate Planning Fact Sheet
Why make a will?
Death is not easy to contemplate. There is a popular misconception that if you die without making a Will then the rules relating to intestacy are probably what you would want to do anyway but often, they do not. There are many advantages of having a professionally drafted Will and all we can do here is outline some of the most important ones.
What many people don’t realise is that intestacy does not provide for your entire estate to pass to your husband or wife even if there are no children. The provisions do not even guarantee that your spouse would inherit the family home, and he or she could end up sharing your estate with your family (including parents, brothers, sisters and others).
The law does not recognise cohabitees as having the same rights as a spouse or registered civil partner. If you do not make a Will your cohabitee may well be left with nothing on your death, however long you have lived together.
Every person has a “nil rate band” (NRB). This is the amount of your estate that is not taxed on your death instead of the normal inheritance tax (IHT) rate of 40%. It is very similar in many ways to your personal allowance for income tax purposes. The amount of the NRB can change each year when the government of the day changes a variety of tax allowances. For this tax year it is £325,000. There is also the additional residence relief of £175,000 per person where a property is left to a direct descendant. There are also some other reliefs that you can get on IHT, for example, some business and agricultural assets and spousal relief.
There are various things that you can do either in a Will or outside of a Will which can help to reduce or even eradicate completely the risk of paying 40% IHT on your estate. Intestacy does not take any of this into account.
The rules on intestacy do not provide any gifts of any kind to friends or to charities but in a Will, you can make any gift that you wish.
As well as dealing with how your estate is divided a Will can also specify who should deal with your estate. This would include gathering in and distributing all the assets and dealing with any ongoing trusts that you set out in your Will. On an intestacy that would automatically be your next of kin who may not be a particularly suitable person or persons to deal with the financial aspects of your estate.
Wills can also be used to set out any wishes that you may have in respect of burial or cremation, organ donation or indeed the funeral itself.
Home-made Wills are usually made with the best intentions but often are unsatisfactory or even invalid. There are a number of common problems including:
- Failure to use the correct terminology resulting in a failure to have the desired effect
- Failure to make any provision in the event that a named beneficiary may die before you do. What would happen to the gift to them in those circumstances?
- Failure to follow the very strict rules relating to the signing of a Will which can render the Will totally or partially invalid
- Failure to take into consideration any tax benefits that may be achieved in the Will
Assets that pass outside a Will
There are two ways that assets can be owned jointly by two or more people. The legal term is tenants in common or joint tenants.
When property is held as tenants in common than your share of that property forms part of your estate and will therefore pass according to your Will on your death. That can be quite useful in certain circumstances and can be discussed specifically with you by your solicitor.
If you hold property as a joint tenant then the property will pass automatically to the co-owner of that property on your death, so the surviving co-owner becomes the sole owner. This happens completely outside of your Will or any intestacy.
It is common for spouses to hold property as joint tenants. It is possible to change a joint tenancy into a tenancy in common if circumstances make a tenancy in common more suitable. Your solicitor can advise you on this.
If you have the use or benefit of an asset which is held in a trust, then on your death what happens is governed by the trust deed itself and not by your Will. The exception to that is if the original trust deed gives you a “power of appointment” which is a power to decide who should have the trust asset. You can exercise that power in your Will. If you do have any benefit under a trust you will need to ask your solicitor to check the terms of the trust deed when your Will is prepared.
Life assurance policies and pensions with death benefits pay out on death. The general rule is that money from these would be paid into your estate on your death. There are two consequences. The first is that the money could be liable to IHT along with the rest of the assets in your estate. The second is that the money will go to the beneficiaries named in your Will. Both of these consequences can be avoided by writing the life assurance policy or the pension death benefit in trust. This is quite commonly done by the life assurance or pension company and indeed currently many of them are automatically written in trust giving the life assurance company or the pension company the right to decide where the money goes to on your death.
If you own an asset abroad it does not necessarily follow that you will be able to pass it under your Will made in the UK. If you have any such assets you need to bring them to the attention of the solicitor writing your Will as they may well have to be dealt with in another way, for example you might have to make a further Will in the country where the assets are held.
English Wills for non UK Domiciled persons
The word ‘domicile’ has a particular legal meaning and if you think this may apply to you at all then you need to take correct legal advice. If you are not domiciled in England and Wales but you have assets in the UK then you need to be particularly careful about how you deal with any of this in a Will. Different rules apply in different countries. It is extremely important that you get full and proper legal advice.
Costs
We would be happy to give you a fixed price quote for making your Will. We have standard rates for straightforward Wills for both individuals and couples. We can also provide a fixed price quote for making your Will if your circumstances are more complicated or extensive additional advice is needed.
