Director Suzannah Farnell explains the importance of leaving a Will and provides a quick guide to writing one.
The topic of wills and estate planning is one that many people avoid for as long as they possibly can and, to some degree, it’s fairly easy to understand why. The very connotation of a Will invokes an image that offers a clue toward our attitude. A Will, of course, means making arrangements to leave your assets to your family, loved ones and any other chosen beneficiaries in the event of your death. Facing up to mortality is something which many people find difficult, of course, particularly as they grow older, but the plain common sense of the matter is that, if you’ve spent your entire life helping to support your family, and amassed some assets to pass on along the way, then you owe it to both them and you to draw up the strongest and most comprehensive plan possible.
In addition to facing up to their own mortality many people feel that there is no way to look after everyone in the way that they want. Divorce and re-marriage mean that ‘blended families’ are now a mainstay of modern Britain. What people don’t seem to realise is that a well drafted Will is the best way to prevent problems. The correct legal advisor will know exactly what structure is required to ensure that everyone you care for is adequately provided. It is their job to advise you and rest assured, there is no issue that cannot be dealt with.
Many people make the mistake of assuming that their assets will automatically pass on to the person they regard as their next of kin, but this is not always the case. Unfortunately, the provisions are complicated and, especially when there are children involved and where divorce and second or third marriages are concerned, they often do not provide for your loved ones in the way that you would wish. There is also a large misconception that co-habitation provides the same rights as marriage under intestacy. It absolutely does not.
Where intestacy does not provide adequately for the people financially dependent upon you it is possible for them to make a claim against your estate. This involves a Court application and is both lengthy and costly in terms of both finance and emotions. These claims can take years to be resolved at a time when your family is already facing the loss of someone dear to them.
In addition, when factors such as Inheritance Tax (IHT) are thrown into the mix it becomes absolutely vital to set up the structures which will makes sure that your assets most importantly, pass to right people in the right way and still very importantly, that they pass in the most tax efficient manner possible.
The maze of legislation, the complexity of tax planning and the fact that there are a range of perfectly legitimate steps that can be taken to minimise what is going to be your last tax bill (thus maximising the benefit to your loved ones), means that taking professional third party advice when planning your estate is an eminently sensible move, and one which may have positive repercussions stretching many decades into the future.
Many people assume that IHT is a rich person’s tax, but growing prosperity amongst older generations, much of it underpinned by rising property prices, means that more people than ever are finding themselves in the IHT bracket although they often, unfortunately, don’t realise this until it is too late to anything about it.
At the moment, IHT is payable by some 4.8% of the population, and, according to the Office for Budget Responsibility (OBR), this figure is expected to rise to 10% by 2018/19. Currently, the IHT threshold sits at £325,000 (double that if a spouse or civil partner leaves their assets to their partner), meaning that anything you pass on above this limit is subject to 40% tax, payable by the beneficiary. The government is currently looking to increase this threshold but any increase will currently only apply to the matrimonial home where it is passed directly to children.
There are many other aspects to estate and inheritance planning and legislation but the scope is too wide for this article. Essentially, your Will is first and most fundamental step to any estate planning. It may be that there are other steps to take to minimise your inheritance tax bill both during your life time and on death but your Will is the building block to start from and will lead to further discussions and advice from your advisor.
The first step in any efficient Will plan, then, is to sit down and draw up a comprehensive list of all of your assets, including any properties you own, bank savings, lump sums payable on death such as insurance or pensions, stocks, shares and other investments, motor vehicles and belongings such as antiques and jewellery. You also need to consider who are the people that you want to take care of if anything should happen to you.
It is essential that you see a well-qualified advisor, who should also be someone that you like and trust. Unfortunately, the Will industry is not regulated, which means that there are too many people within the sector that have no legal knowledge. In order to make sure that you receive the right advice you need to see a qualified lawyer who is a specialist within the area of law.
Many people see the cost as prohibitive and some people even think that they can make a Will at home. Wills are complicated legal documents. The more complicated your estate, the more complicated the document will be. Even at their most basic level Wills contain trusts and must be executed in the correct way. If you or your advisor do not understand the law behind the document, the chances are that it may fail. If your Will fails or does not take care of everyone properly then once again your estate is faced with intestacy and potential claims.
One other point to mention that very few people seem to know is that marriage revokes a Will. If you are due to get married it is essential to see your advisor before you get married to make sure that this does not happen.
Should making a Will be a legal requirement? Car insurance is a legal requirement and most people would not consider driving their car without it despite the annual cost. The whole point of the insurance is to ensure that everyone will be looked after if there is an accident. Ultimately a Will is a personal choice but it is essentially the most important insurance document you will put it place in terms of protecting your family and loved once. It takes a lifetime to create an estate – a Will makes sure that you create a lasting legacy for generations to come.
A link to a downloadable PDF version of this article can be found here.