Why You Should Make a Will
Articles:
Why do we avoid making a will?
Two out of three of us don’t bother to make wills. So why don’t we? After all, not making a will may mean partners or loved ones could face financial hardship at a time when they will be struggling to come to terms with their grief. We avoid it because it means coming face to face with our own mortality, something we don’t like to think about at the best of times.
The benefits of making a will
Making a will is important because it
• Controls how your assets are distributed
• Can save inheritance tax
• Avoids family disputes
• Provides peace of mind
The problems caused by not making a will
Many people don’t realize the problems they cause by failing to make a will. They may assume they have too little to leave or that their family will automatically inherit everything anyway. But that is simply not the case.
If you die intestate (without having left a will) then your estate will be divided according to intestacy laws. This means your worldly goods may not end up where you think they will, or even where you would like them to. For example, if you’re married with children, under the intestacy laws, your spouse gets everything up to £250,000, plus your personal possessions. The problem is that if your property is worth more than £250,000, your spouse could lose their home because surviving children or grand children are entitled to some of the estate if it exceeds £250,000. So the property wouldn’t belong entirely to your partner.
Unmarried couples living together fare even worse. If they don’t make wills, their partner will inherit absolutely nothing under intestacy rules. By law, only married couples and those in civil partnerships are recognized as having any rights over property. Also the intestacy laws are not likely to be tax efficient.
Why you should use a solicitor to make a will
Taking that decision to write your will is one of the most important steps you can take to protect your family. But it’s vital to get it right, which is why it’s advisable to use a solicitor. Even if you only have a few possessions or a small amount to leave, the solicitor will know the best way to word your will. The language in a will needs to be very precise if it is to have legal standing.
A solicitor will also be able to advise you on other aspects of your will, such as making provision for loved ones with special needs or who are in financial difficultly or going through marital problems. You do not want to give your estate to someone who may lose it to a third party such as a spouse in a divorce action or a creditor in bankruptcy proceedings. Again by seeking professional advice you can draft your will to avoid inheritance tax or plan for nursing care fees.
What you must consider putting in a will
Before you set off to see a solicitor, it’s a good idea to have some thoughts as to what you would like to happen to all your worldly goods when you die. Consider the following questions:
- What are my main assets and how much are they worth. For example house, car, life insurance, savings, jewellery, clothes? Who do I want to inherit these?
- Who should be executor of my will? This is the person who will administer your will, gathering together all your assets and distributing them according to your wishes. A beneficiary can be an executor. It is a good idea to choose someone who is reasonably organized. Many people appoint a solicitor as well as a close relative to be executors. Although the solicitor will have to be paid for this work, he may be essential if your will is complicated or you have any doubts about the people you would prefer to be the executors being able to work together in harmony.
- Who will be my beneficiaries and how will they share the estate?
- Who would I like to be guardian(s) of my children?
Once you have decided exactly what you would like to happen to your estate, it's time to visit your solicitor. Remember he or she is there to help you and make suggestions. For example, you may say you want everything to go to your partner when you die. However, the solicitor will want to know what you would like to happen if your partner died before you or if you both died in a car accident together. Although the chances of this happening are very slim, the solicitor will want to ensure he understands your wishes.
Once your will is drawn up by your solicitor, you will be asked to check it and sign it in front of two independent witnesses. These should not be people who would benefit from your will. Once signed, the will needs to be kept in a safe place, your solicitor will probably suggest storing the original document for you, for a small charge.
Intestacy Article
Solicitor Michael Stennett spotlights problems that can occur when you do not make a will.
Rose (not her real name) came to see me for advice recently. She was one of the many forum members who sought advice during the recent Wills Week. Rose was a widow. She told me her late husband Jack did not make a will but left her his savings and the family home which he solely owned. The house was worth about £450,000 and savings were around £500,000. Rose and Jack did not have children. Jack had a brother Morris. Rose did not like Morris and the feeling was mutual.
Rose instructed me to prepare her will and also to sort out Jack’s affairs. I explained to Rose that because Jack did not make a will strict rules applied as to how his estate would be distributed. The rules are called “intestacy”. I advised Rose that under intestacy she inherited her late husband’s house, but was only entitled to one half of Jack’s savings, the other half going to Morris. Rose was distraught at the thought of Morris receiving £250,000 because she feared this would deny her a comfortable retirement. Rose asked me to write to Morris asking if he would consider declining the gift. I am still waiting for a reply! In the meantime I helped Rose prepare a will gifting her estate to charity.
Making a will is important because it can save inheritance tax, control how your assets are distributed, avoids family disputes and provides peace of mind. If you already have a will it should be reviewed regularly and particularly when circumstances change.
You can contact Solicitor Michael Stennett on 020 8920 3190 if you have any questions about this topic.
Problems with inheritance tax planning for elderly couples in second marriages
Arthur is in his mid 80s and is married to Betty who is 77. Both have been married before and have survived their spouses. They also have children and grandchildren from their first marriages. Arthur and Betty live in a large house worth £600,000 registered in Arthur’s sole name. Arthur also has savings of around £300,000. Betty has savings of £100,000. Each has a small pension income. They live on the income generated by their savings which is not much nowadays. Arthur sees little of his children. Betty’s daughter Kate visits Betty and Arthur frequently because she is close to her mother and lives nearby. Arthur is very fond of Kate. Arthur’s children are suspicious of Kate’s motives believing she is only after their inheritance.
Arthur has come to see me about changing his will. He has not reviewed it since his first spouse died. He wants to do right for his children; whilst ensuring Betty enjoys the benefit of his estate should he die before her. He would like to leave something to Kate. He does not want the Revenue to get any of his estate, and has heard that making lifetime gifts is a useful tax planning tool.
I gave Arthur the option of selling the house and moving to a cheaper property. The capital released from the sale could be given to his children. He could at the same time gift part of his savings. These lifetime gifts would not be subject to tax were he to survive seven years. Arthur thought he was too old to endure the upheaval that moving house would bring. Additionally he was worried about giving away his savings because he relies on the income he gets from his investments.
I told Arthur he could opt to avoid tax completely by giving his entire estate to Betty because gifts to spouses are tax free but there was the danger his children would lose out if Betty passed on the estate to Kate.
There was a third option. Arthur could gift the estate to Betty by way of a “life interest” trust. The trust would give Betty the right to receive the interest on his investments. She could also have access to the capital at the discretion of the trustees of his will. The life interest would also entitle Betty to live in the house until she died or left permanently. The estate would pass to Arthur’s children when Betty dies. Since Arthur was giving a life interest of his assets to a surviving spouse his estate would not be liable to tax on his death. However there would be a substantial sum to pay when Betty died. I told Arthur the way to reduce tax would be to set up in his will a discretionary trust making his children the beneficiaries. The trust would comprise the sum Arthur could give to them tax free (presently £325,000). The trustees would need guidance as to manner that the trusts would operate in a document known as a “letter of wishes”. My client thought setting up will trusts was the best option and I prepared a will for him with these provisions.
Arthur was worried about how his children would treat Betty after he died. Making them the executors of his will and trustees of his estate would create tensions caused by conflicts of interests. To avoid problems Arthur appointed Stennett & Stennett solicitors as the executors and trustees of his will.
You can contact Solicitor Michael Stennett on 020 8920 3190 if you have any questions about this topic, or why not attend the free advice clinic that takes place at Stennett & Stennett, 4 Winchmore Hill, Southgate, London N14 6PT (opposite Marks & Spencer) on the first Wednesday in every month.