A Will outlines who’ll receive your property, money, possessions and investments (collectively making up your estate) following your death. If you die without a valid Will in place (die intestate), then intestacy rules will come into play to determine how your assets will be distributed. This is based on a strict order of family connections, irrespective of the closeness of those relationships.
In addition to not having a say in how your estate is distributed, intestacy can create a lot of unnecessary friction between your family members and leave them with unexpected costs, at what is already a very difficult time.
What happens if you don’t have a Will in place?
- Although spouses and civil partners have some specific rights, they don’t automatically inherit the entire estate of their other half. If you and your partner aren’t married or in a civil partnership, your partner won’t have any right to inherit if you don’t have a Will.
- Your children may not be looked after by those you would have chosen. Godparents have no legal guardianship rights and stepchildren don’t have any automatic inheritance rights.
- You could unwittingly leave your loved ones with a sizable Inheritance Tax (IHT) bill that could potentially have been avoided with some planning ahead.
- A lot of additional form filling and legal requirements are necessary to determine who will look after and receive your estate. This can lead to huge delays in the distribution of your assets and significant additional costs.
- Any unclaimed assets will eventually pass directly to the Crown. It’s estimated that in the UK, there’s more than £15 billion of unclaimed assets sitting in bank accounts of the deceased1.
How do I put a Will in place?
IHT and estate planning form an important part of your financial planning. Although you can choose to write a Will yourself, the best way to ensure that it’s legally binding and meets your objectives is to engage an expert in this field. They’ll also be able to highlight strategies and opportunities that you may not have thought of.
How much will it cost?
The charge for drawing up a Will varies from one firm to another, and also depends on the complexity of your circumstances and your Will. Straightforward Wills, with no trusts, for one person may cost just a few hundred pounds. In terms of value, this cost is far outweighed by the peace of mind and other benefits you get from having a Will in place.
5 reasons to have a Will in place:
Keep it in the family
Most people want to leave their wealth to their spouse, children, and future generations of their family. If you choose to gift directly to your family members, these gifts will form part of their estate. If the recipient’s circumstances change, for example, they divorce, re-marry or become bankrupt, this can leave gifts exposed to claims from people outside the family. If keeping your hard-earned wealth in your family is something that’s important to you, it’s possible that your Will can be written taking this into consideration.
Peace of mind
Because a Will is a legally binding document, it can give you peace of mind that your wishes will be followed, and difficult decisions won’t fall to your family. While it can also be a good idea to discuss your intentions with your loved ones to avoid any surprises in future, this alone isn’t enough. You can also add a more informal Letter of Wishes to sit alongside your Will. This is an opportunity to explain your thinking if you would like to do so.
Leaving more money
Wills are a critical part of IHT and estate planning. IHT rules and the steps you can take to reduce any tax bill can be complex, so seeking advice is important. Planning ahead provides an opportunity to consider the likely tax liability on your death and any available strategies to achieve maximum tax efficiency and flexibility. You can also build in flexibility and protection to ensure those you would like to receive your financial legacy, only do so when and how you would like them to.
Help yourself while helping a good cause
Choosing to leave some of your estate to charity can actually save you money. Any gift you make to a registered charity is exempt from IHT. But it’s also possible that a gift to charity could bring the remaining value of your estate under the IHT threshold, removing any IHT liability. To achieve this, you will, of course, have given some of the value of your estate away.
Furthermore, if you leave 10% or more of the value of your estate to charity, you benefit from a lower IHT rate of 36% (rather than 40%) on the taxable part of your estate. It’s amazing to think that 6 out of 10 RNLI lifeboat launches are only possible due to gifts left to them in Wills2.
Be prepared for anything
In order to give instructions to create your Will, you must have mental capacity in the same manner as we discussed in our recent article on Lasting Powers of Attorney. If there’s one thing the pandemic of the last two years has taught us, it’s that we never really know what’s around the corner.
If you need to write a Will or update your current one to reflect your wishes, it’s important to get this in place as soon as possible to ensure they are carried out should anything unfortunate happen.
Despite the compelling reasons to have a Will in place, recent research from Canada Life found that 59% of UK adults don’t3. Many believe making a Will is something you do when you get older, but some don’t get around to it or sadly become unable to make the decision for themselves.
Having an up-to-date Will in place can be life changing for those you leave behind, ensuring difficult decisions won’t fall to them. In addition to giving you peace of mind, it’s the only way to make sure the people and causes you care about are looked after.
If you want to ensure you have your say in how your wealth is distributed and would like to know more about how IHT and estate planning can benefit you, we’d be delighted to help. Contact us at firstname.lastname@example.org or call 01202 025481.