Thinking about death is not easy. Talking about it is even harder. The reality of our own mortality is a tough subject, but a discussion will ensure your assets are left to the right people.
If you want to be sure your wishes are met after you die, then it’s important to have a Will. A Will is the only way to make sure your money and possessions that form your estate go to the people and causes you care about.
Important component of an estate plan
One of the most important components of an estate plan is a Will. First and foremost, a Will puts you in control. You choose who will benefit from your estate and what they are entitled to. You also decide who will administer your affairs after your death.
If you do not make a Will, the intestacy rules will decide who benefits from your estate – and that can produce undesirable results. The law also sets a hierarchy of who is able to handle your financial affairs after death, and that can lead to problems if the person is not suitable because of age, health, geographical location, or for any other reason.
Consider implications such as Inheritance Tax
Wills deal with more than just assets, they also cover important aspects of your life such as who will care for your children and who will be the executor of your estate. By planning ahead, you can give yourself time to consider implications such as Inheritance Tax and how your family will be cared for.
You can also minimise any tax liabilities that your estate may incur. Your Will is a final indication of your wishes and removes any uncertainty and directs your executors as to how to carry out your wishes.
Assets distributed according to your wishes
If you die without a Will your assets are distributed according to the law rather than how you may like them to be. Dying intestate is a technical term used in law for someone who dies without a Will. It will take longer to sort out your affairs and could mean those close to you are unable to access any of your finances for some time after your death.
Writing a Will means your assets are distributed according to your wishes. If you are not married or in a registered civil partnership your partner will not inherit automatically – by making a Will you can ensure that your partner is provided for.
Unmarried partners, including same-sex couples who do not have a registered civil partnership, have no right to inherit if there is no Will. One of the main reasons also for drawing up a Will is to mitigate a potential Inheritance Tax liability.
Where a person dies without making a Will, the distribution of their estate becomes subject to the statutory rules of intestacy (where the person resides also determines how their property is distributed upon their death, which includes any bank accounts, securities, property and other assets they own at the time of death), which can lead to some unexpected and unfortunate consequences.
The beneficiaries of the deceased person that they want to benefit from their estate may be disinherited or left with a substantially smaller proportion of the estate than intended. Making a Will is the only way for an individual to indicate whom they want to benefit from their estate. Failure to take action could compromise the long-term financial security of the family.
Implications of dying without making a Will
- Assets people expected to pass entirely to their spouse or registered civil partner may have to be shared with children
- An unmarried partner does not automatically inherit anything and may need to go to court to claim for a share of the deceased’s assets
- A spouse or registered civil partner from whom a person is separated, but not divorced, still has rights to inherit from them
- Friends, charities, and other organisations the person may have wanted to support will not receive anything
- If the deceased person has no close family, more distant relatives may inherit
- If the deceased person has no surviving relatives at all, their property and possessions may go to the Crown
Without a Will, relatives who inherit under the law will usually be expected to be the executors (someone named in a Will, or appointed by the court, who is given the legal responsibility to take care of a deceased person’s remaining financial obligations) of your estate. They might not be the best people to perform this role. Making a Will lets the person decide the people who should take on this task.
Where a Will has been made, it is important to review it regularly to take account of changing circumstances. Unmarried partners have no right to inherit under the intestacy rules, nor do step-children who have not been legally adopted by their step-parent. Given today’s complicated and changing family arrangements, Wills are often the only means of ensuring legacies for children of earlier relationships.
Simplifying the distribution of estates for a surviving spouse or registered civil partner
Changes to the intestacy rules covering England and Wales, which became effective on 1 October 2014, were aimed at simplifying the distribution of an estate and could mean a surviving spouse or registered civil partner receives a larger inheritance than under the previous rules.
Making a Will is the cornerstone for Inheritance Tax and estate planning.
Before making a Will, a person needs to consider:
- Who will carry out the instructions in the Will (the executor/s)
- Nominating guardians to look after children if the person dies before they are aged 18
- Making sure people the person cares about are provided for
- What gifts are to be left for family and friends, and deciding how much they should receive
- What provision should be taken to minimise any Inheritance Tax that might be due on the person’s death
Preparing a Will
Before preparing a Will, a person needs to think about what possessions they are likely to have when they die, including properties, money, investments and even animals. Prior to an estate being distributed among beneficiaries, all debts and the funeral expenses must be paid. When a person has a joint bank account, the money passes automatically to the other account holder, and they can’t leave it to someone else.
Estate assets may include:
- A home and any other properties owned
- Savings in bank and building society accounts
- Insurance, such as life assurance or an endowment policy
- Pension funds that include a lump sum payment on death
- National Savings, such as premium bonds
- Investments such as stocks and shares, investment trusts, Individual Savings Accounts
- Motor vehicles
- Jewellery, antiques and other personal belongings
- Furniture and household contents
Liabilities may include:
- Credit card balance(s)
- Bank overdraft(s)
- Equity release
Jointly owned property and possessions
Arranging to own property and other assets jointly can be a way of protecting a person’s spouse or registered civil partner. For example, if someone has a joint bank account, their partner will continue to have access to the money they need for day-to-day living without having to wait for their affairs to be sorted out.
There are two ways that a person can own something jointly with someone else:
As tenants in common (called ‘common owners’ in Scotland)
Each person has their own distinct shares of the asset, which do not have to be equal. They can say in their Will who will inherit their share.
As joint tenants (called ‘joint owners’ in Scotland)
Individuals jointly own the asset so, if they die, the remaining owner(s) automatically inherits their share. A person cannot use their Will to leave their share to someone else.
This can sometimes happen even when there is a Will, for example, when the Will is not valid, or when it is valid, but the beneficiaries die before the testator (the person making the Will). Intestacy can also arise when there is a valid Will but some of the testator’s (person who has made a Will or given a legacy) assets were not disposed of by the Will. This is called a ‘partial intestacy’.
Intestacy therefore arises in all cases where a deceased person has failed to dispose of some or all of his or her assets by Will, hence the need to review a Will when events change.
Time to review your Will?
Reviewing your Will every few years is as important as making one in the first place. You may wish to change how your assets are to be distributed, or your family circumstances may have changed. You should look at your Will every couple of years to check that it is still an accurate reflection of your wishes.
Growing your wealth
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