More than 60% of the UK population don’t have a will.
There’s a fear that if you make a will you’re tempting fate. This is a little like saying, ‘If I take out fire insurance my house will burst into flames’ It wont happen, making a will wont kill you!
Making a will means you to decide who inherits your property as opposed to leaving it to the vagaries of an Act of Parliament passed in 1925. This was a time when George V was King and Emperor of India. Do you really want the guys who were running the country then, to decide who inherits your property?
Now take a deep breath and read on:
Keep it flexible
Your will should be flexible, you dont want to have to change it each time an executor or a beneficiary dies or you move house. These problems can easily be avoided by:
e.g. Don’t say; “I leave my house at 52 Dollis Road to my son Geoff.” Far better to say; “I leave my main residence at the date of my death to my son Geoff”.
What about if you don’t own a house at your death, but have sold it and the money is in the bank? Geoff won’t get the money unless you will says so.
You also have to be careful about using the word “My”. If you say in your will “I leave my car to Bill” then it means you are leaving the car you own at the time you made the will. This may not be the car you own when you die. If you do own another car at death Bill wont inherit it.
Better to say “I leave any car I own at my death to Bill”
A will normally contains the following components:
Executors and testamentary guardians
Your executors are responsible for dealing with your financial affairs after your death. The purpose of testamentary guardians is to have some one who will care for any of your children who are minors (under the age of 18) after the death of yourself and your spouse. Those suitable to look after your money may not always be the same as those most suited to look after your children and visa versa.
Generally this will be individual items such as “all my jewellery” or “a gift of £1,000″. It is better to dispose of large parts of your estate in the gift of residue.
In most cases testators deal with the majority of their estate in this manner. It avoids the need to be too specific. In practice it means ‘What ever I’ve got I leave to…’
Without such a clause you may leave some of your property un-disposed of, this is known as a partial intestacy. If your residuary estate is being divided between several people, care needs to be taken to over the drafting to prevent a partial intestacy arising should one of the beneficiaries die before you. Make it clear the property is only shared between surviving beneficiaries.
If your residuary estate is left to a single person then it is a good idea to name a substitute in case the original beneficiary dies before you.
Trust provisions for minors
Its not a good idea to allow children to inherit a large amount of money at an early age as they will probably spend it. Children inherit at 18 unless the will states otherwise. It’s far better to keep a residuary estate, which is passing to children, in trust until they reach 21 or 25. These trusts are normally drawn so funds are available for a child’s maintenance and schooling and also for the purchase of property. There may be some Inheritance Tax issues with larger estates but these needn’t be significant.
All estates on death are subject to Inheritance Tax (‘IHT’). Currently, the first £325,000 worth of assets that you leave is taxed as 0%. This is known as the Nil Rate Band (“NRB”). Assets passing between spouses (and registered Civil Partners) (provided they are both domiciled in the UK) are free of IHT. If you have made any gifts in the 7 years before your death which exceed the sum of £3,000 per annum then you may have used the whole or part of your NRB. On the death of a spouse (or civil partner) the survivor will inherit any unused NRB that the deceased spouse hasn’t used. You can therefore potentially leave assets worth up to £650,000.00 free of IHT.
What happens if you are not married or in a civil partnership?
If you are have a partner and you are not married then the tax man doesn’t treat you kindly. Subject to your NRB all assets passing between you on death are subject to IHT. You dont inherit your partners NRB.
Please note this is the tax position at the time of preparing this guide. The law on IHT is subject to frequent change. You should keep your affairs under frequent review to have regard to any changes in IHT which might affect you.