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Why make a Will?

Over 70% of the UK population does not have a current will that is an accurate reflection of their finances and personal choices at the time of their death. Writing a will creates certainty and gives you the peace of mind of knowing exactly how your money, property and possessions will be dealt with after your death. Without a will, these may not go to those you care and provide for and instead be a cause for family argument as is often picked up in the television ‘soaps’.

Making a will may seem like a morbid thought to consider but as Christian it is part of our responsibility of stewardship of our resources, whatever the size of our estate. A valid will guides those who are left behind and is usually the first step to take in structuring your affairs and can be very significant if there is a wish to minimise your liability for inheritance tax. Unmarried partners cannot normally inherit from each other unless there is a will, which may cause serious financial problems. If you have children then it is important to have ‘guardians’ if either both (or only) parent(s) die.

Then, if your circumstances change (eg on divorce) it is important to update a will- for example, re-marriage normally invalidates an existing will. When looking at your will, care should be given to what other asset transfers would be triggered by death such as any life assurance policies or pension policies.

WHAT HAPPENS IF YOU DIE WITHOUT A WILL?

When a person dies without leaving a valid will, their property (estate) must be shared out according to certain rules. These are called the Rules of Intestacy- see the attachment as a guide to this.

In general it is spouses or close relatives that can inherit under the fierce rules of intestacy. If someone makes a will that is not legally valid, the Rules of Intestacy decide how the estate will be shared out, not the wishes expressed in the will- hence a will needs some specialist drafting knowledge.

If there are surviving children, grandchildren or great grandchildren of the person who died, and the estate is valued more than £250,000, the partner will inherit all the personal property and belongings of the person who has died, plus the first £250,000 of the estate and a life interest in half the remaining estate. This means that if you are entitled to the life interest, you cannot get rid of, or spend that part of the estate. You can, however, have the benefit of it during your lifetime.

OTHER MATTERS FOR CONSIDERATION

TAX EFFICIENCY- Rising property prices are making more estates liable for inheritance tax. If the total value of everything you leave when you die is above the available threshold (which varies from tax year to tax year and is currently £325,000 with a double allowance for married couples) your beneficiaries will have to pay inheritance tax at 40% on anything above it. If you think this applies to you it would be prudent to take independent financial advice, or legal advice, to find the best way to manage the implications of this.

TRUSTS AND FINANCIAL PLANNING- As well as making a will you can use a family trust to pass on your assets in the way you want to. A simple example of this is a ‘will trust’ (say up to the ‘nil rate’ band) which may have a spouse as a life tenant receiving income from the trust assets and then the children as the ultimate beneficiaries. Trusts can also be really useful to pass on assets to beneficiaries who can’t immediately manage their own affairs (either because of their age or a disability).

LIVING WILLS- Another increasingly common fact of life is the need for living wills. By executing a lasting power of attorney (LPA) clients can allow their agent to deal with their property in accordance with their wishes. This practice ensures that complicated legal proceedings can often be avoided, especially in cases where the person involved is either physically or mentally vulnerable. Specialist legal advice should be taken to arrange this type of will.

LEGACIES- Including a gift in your will to a charity ensures that some of your estate is invested in work you believe in, and continues to bear fruit in the future. You have the assurance that even when your life ends you can still enable crucial work to continue and grow. You can leave all or part of your estate to a charity – money, property, shares and specific items. What’s more, legacies to UK registered charities are exempt from inheritance tax. In the recent budget the chancellor announced a 10% reduction on inheritance tax where someone gives 10% or more of their estate to charity. This is due to come into effect from April 2012. (Please see our previous ACFA note on Philanthropy)

In summary, your will is the chance for you to give a final expression to the things that matter. People and causes that are important to you. A will is essential for all property owners, older people, those in long term relationships, the wealthy and is desirable for all adults. Some of this may be obvious, but it is worth taking time to think about how you want your estate to be used so that “your will is a true reflection of your priorities and values”.

Note: References to Marriage also apply to recognised civil partnerships.

Andrew Meade is Managing Director of Wellserve Advisers, with offices in Bromley and London

Download a Guide to Intestacy (.pdf)