The fact is that most people put off making a Will. It is simply one of those things that can be put off until another day or else is considered something that other people need as they have lots of money.
The truth is that a Will is important whatever your circumstances, whatever your time of life and however large or small your assets.
The principal reason to make a Will is to ensure that your estate (your assets less your liabilities) goes to the people you wish to benefit.
If you die without a Will (intestate) your estate will be distributed according to rules laid out by statute. The results are rarely what people expect.
Where you leave a widow (or widower) and children, the surviving spouse will only have a right to personal chattels and a sum of £250,000. Thereafter she will only get the income for one half of the rest of your estate.
Should you have an unmarried partner (and no civil partnership) he or she will have no right to your estate under the rules. For those who are unmarried without children consider whether you really wish your assets to be divided between your parents, your siblings, distant relatives or (even worse!) going to the Crown.
A Will is the place to ensure that your assets are given to those who most need them. But it has other uses too.
You can use your Will to express your wishes for your funeral. It can state who you would like to be responsible for the care of your children should there be no surviving parents. It is an essential part of planning to avoid paying Inheritance Tax, often described as the avoidable tax.
Tax considerations
This is an area where advice is essential but also worthwhile. Any part of your estate (i.e. the total of your assets less your liabilities) over £325,000 will be subject to tax at 40%. The limits are easily reached when the value of property is taken into account, especially if mortgages will be discharged by insurance.
The effect of tax at this level can be disastrous – necessitating the sale of homes and businesses in order to pay the tax and substantially reducing the amount that your intended beneficiaries will receive. Yet it is a tax which gives many opportunities for relatively easy avoidance.
Find out more with our Seven Steps to saving Inheritance Tax.
Revising your Will
Perhaps you have read this article with a feeling of smugness, safe in the knowledge that you made a Will and have nothing more to think about. However, in the same way that you will regularly review your investments and assets you should periodically consider revising and updating your Will, particularly as your circumstances change.
Key times to review your Will are:
- Changes in the family – births, deaths or children growing up and becoming independent.
- Marriage and Civil Partnership – will automatically revoke a previous Will.
- Divorce or dissolution of Civil Partnership – this will not revoke your Will but will prevent your spouse/civil partner benefiting.
- Separation – does not have the effect on a Will which a divorce has, so it is best to review the Will as soon as separation occurs.
- Change in financial circumstances – Even relatively minor changes can have an affect on your Will.
- Changes in taxation – if your estate is large enough (or becomes large enough) to attract tax, new taxes or reliefs or changes in the rates may call for changes in your Will.
- Going to live abroad – it is normally desirable to make a Will in the country where you reside to simplify the administration of your estate. It may also be helpful if you need to establish a change of domicile. Local advice should be sought.
In any case, it is a good idea to review your Will at least every year, so that it is always up to date.
What to do next
A Will is a comparatively simple document and many will feel able to draft their own with some guidance. Lawpack's DIY Last Will & Testament can assist you in doing this. Others will prefer the services of a solicitor or will writer, most of whom can provide an inexpensive service and some of whom will be able to offer advice on the tax aspects.
Richard Dew is a specialist Chancery barrister practising from Ten Old Square in Lincoln’s Inn, London. Ten Old Square is one of the foremost chambers in the UK dealing with issues such as Trusts, Wills and Probate, Property and Tax. It has an outstanding reputation for “private-client” work. As well as representing clients in contentious matters relating to Trusts, Wills and Probate, Richard also advises clients on non-contentious matters involving Estate Planning.