Making a Will

WILLS – AND SOME REASONS FOR HAVING ONE !

Although many people ensure that they have protected their belongings during their lifetimes (eg by insurance), a significant number of people take no steps to make provision for their families and loved ones after they have died by way of a Will.

People put off preparing a Will for a variety of reasons. Some believe that discussing a Will could hasten their own death; others believe that they do not have sufficient assets to need a Will; and many believe that they do not need to prepare a Will as their spouse / partner will inherit everything anyway. The last misconception can (and often does) result in serious difficulties for those left behind.

So, why have a Will ?

There are a number of reasons for preparing a Will and three of the main ones are :

1. Peace of Mind

One of the most important reasons for preparing a Will is for your (and your family`s) peace of mind. You state what is to happen to your estate after you have died. You appoint the people you want to administer your affairs and follow your wishes in the Will. If you have children, you can appoint guardians to look after them if you die when they are under 18. You also state who you want to benefit under your Will and what you want them to receive. In other words, you can take steps in your lifetime to ensure that you provide for your family and loved ones as you wish.

2. Inheritance Tax Planning

Inheritance Tax (IHT) is essentially a tax that takes effect after death. IHT is charged at 40% on the value of someone`s estate which exceeds the Nil Rate Band (NRB). This is the amount which is, in effect “free” of IHT and is currently £285,000.

Various steps can be taken to reduce the potential IHT liability, but many involve giving away money to reduce the value of the estate. Since many people are now subject to IHT because of the value of their home – particularly in this part of the country with the increase in house prices over recent years – many people are not in the position to make such gifts.

However, carefully prepared tax planning Wills can save upto £114,000 of IHT. Such Wills use Discretionary Trusts and make use of both parties` NRBs with the result that upto £570,000 can be “free of IHT” rather than £285,000. These Wills frequently make use of the family home – often the main asset – but in such a way that does not affect the survivor`s security in, or control over, their home.

Unfortunately, these Wills are currently only available for married couples and couples in a civil partnership, but are extremely effective for IHT planning for many people who would otherwise be unable to carry out any practical planning.

3. Intestacy

Many people believe that their spouse or partner will inherit everything on their death. However, this is not necessarily the case. If there is no Will, the Rules of Intestacy will apply. These rules will often not comply with what the deceased would have wanted and can cause serious financial and personal problems for those left behind.

For example, if the deceased is survived by their spouse or civil partner and children the partner will not necessarily receive all of the assets. They receive :

• a. all jointly held assets;
• b. all personal belongings; and
• c. £125,000 worth of assets.

If the value of the estate exceeds this, the balance will be divided into two equal shares. One share will be held on trust for the survivor, but they are only entitled to the interest and not the capital. On their death, the funds pass to the children. The other half is held on trust for the children who will inherit at 18, which is often earlier than many parents would want.

Where there are no children, the surviving spouse or civil partner will still not inherit everything if the deceased is survived by parents, brothers or sisters or even more distant relatives. In this case, similar provisions would apply as above, except the sum received would increase to £250,000.

Where the survivor was not the spouse or civil partner of the deceased, they will not benefit at all under the rules of intestacy.

Summary

By preparing a Will, steps can be taken to ensure peace of mind, both for the person making the Will and also for those left behind. Significant IHT planning can be carried out by Wills and the potentially serious impact of the rules of intestacy can also be avoided by the preparation of a Will.

So, if you have not already prepared a Will, do think seriously about what you can achieve for both yourself and those left behind by preparing a Will.

If you would like further information on Wills and related matters, please contact Iain Wanstall at Parrott & Coales Solicitors in Aylesbury on 01296 318500, or

Email: iain.wanstall@parrottandcoalesllp.co.uk