Tag Archives: wills

Niki Patel, Financial Planning Week tip: The importance of writing and reviewing your will

Historic statistics have shown that a large proportion of the UK population do not have a will, whether this is just because it’s something they have just not got round to doing or whether they find it a sensitive subject. Ensuring that clients have a will which caters for their wishes is really important. In this bulletin we look at some of the main reasons as to why someone should write a will and also ensure the importance of reviewing it if their circumstances change.

Protecting assets

One of the most important reasons for writing a will is to ensure that assets pass to the correct people on death. If someone dies intestate, they risk letting the law decide who should inherit their assets which could be very different from their actual wishes. Even though the intestacy rules are designed to protect the individual’s family, this can still cause several problems especially for those who are not married or in a civil partnership. This is because partners have no automatic rights under the law of England and Wales. Equally for those who are separated but not divorced, their spouse or civil partner would inherit part of the estate on intestacy. Further if there are no close relatives, assets could pass to distant relatives whom the deceased had no intention of leaving assets to, or, if there are no relatives, assets could pass to the Crown!

Tax planning

Prior to the introduction of the transferable nil rate band, in many cases the nil rate band was often wasted on first death by leaving assets to a surviving spouse/civil partner which would otherwise pass exempt. For years many couples relied on the transferable nil rate band rules to ensure use of the nil rate band on second death. That said, given that the nil rate band has remained at £325,000 since 2009/10 and is expected to do so until 2025/26, for some making use of the nil rate band on first death ought to be considered as this reduces the value of the estate on second death which can be beneficial for the purposes of making use of the residence nil rate band and also any growth will be outside of the estate of the second person to die.

The will can therefore be drafted to maximise inheritance tax savings. And, for those who wish to leave assets to charity, if 10% or more of the net chargeable estate is left to charity, the rate of inheritance tax payable on the taxable estate is reduced to 36% instead of 40%.

Ensuring that the will is legally valid

Broadly, for a will to be valid it must be written by an adult, so aged 18 or over and of sound mind, it must be in writing and signed and dated in the presence of two adult independent witnesses. So, it cannot be witnessed by anyone who may be able to benefit under the terms of the will. Currently, due to the pandemic it is possible to remotely witness a will and this will be possible until at least January 2022.

While there is no requirement for a will to be written by a solicitor/legal adviser it is often recommended because they can ensure that it is properly worded to reflect the individual’s wishes and also ensure that it is written in a way to maximise tax savings.


Other considerations

Aside from specifying who should benefit/inherit from any assets, it is important to name who should act as executors. The executors are responsible for dealing with the administration of the estate. This means that they have to complete the inheritance tax account, pay any inheritance tax that may be due and apply for probate, if required. Upon grant they then have the legal right to deal with the assets, so once any debts, taxes, expenses, etc. are paid they can then pass assets on to those who are entitled to benefit under the terms of the will.

If trusts have been created in the will, then, usually, the executors will also be named as the trustees and so will be required to manage and deal with the assets in accordance with the terms of the trust.

In cases where there are minor children, a will can also be useful to name any guardians that should look after the children upon death of the parent(s), otherwise the family courts will decide where the children should go. Equally, a will ensures that such children will be properly looked after, as funds can be set aside for their benefit – usually by including a trust to that effect in the will.

It is also advisable to consider what should happen to any pets, so whether a family member would be prepared to look after them or whether they would go to a particular shelter/home.

A will can also include other wishes, for example what kind of funeral the individual would like, whether they wish to be buried or cremated, whether they would like certain songs played or certain readings read.

Finally, with the popularity of social media, including email, it is advisable to include what should happen to any digital assets within the will.

Reviewing a will

It is really important to review a will whenever circumstances change, for example, if the individual gets married, divorced, becomes a parent or receives an inheritance.

If they already have a will in place and get married or enter into a civil partnership, the will is automatically revoked and so a new will would need to be made. The same rule, however, does not apply if they get divorced or their civil partnership is dissolved. In that case, anything left to the ex-spouse/ex-civil partner in the will would be dealt with as if they had died on the date that the marriage/civil partnership legally ended. This means that any gifts/assets which may have been left to the ex-spouse/ex-civil partner will no longer pass to them, although the provisions in the rest of the will would usually be valid and so could cause unintended consequences where the individual’s circumstances have changed and they wish to redirect assets to other people. Whatever the ex-spouse/ex-civil partner was set to inherit would then be passed on to the next beneficiary who is entitled to it, in line with the terms of the will. If everything had been left to the ex-spouse/ex-civil partner, with no other beneficiaries named, then the estate would be dealt with under the intestacy rules. Therefore, if a will is not updated to reflect a divorce or the dissolution of a civil partnership, the estate might be divided up differently to how it was intended. This could mean that new partners or dependants aren’t provided for.

In terms of actually making changes to a will, this can either be done by codicil – a document changing certain provisions in the will or by writing a ‘new’ will and revoking the ‘old’ will. Ideally, consideration should be given to including a revocation clause in the ‘new’ will setting out that it replaces any earlier will that had been written.

COMMENT:

Hopefully, this provides an overview of some of the aspects that ought to be considered in relation to writing and reviewing a will, but, most importantly, clients ought to be aware that it makes it easier for family and friends to sort everything out on death. Without a will the process can be more stressful and time consuming for their loved ones.