THE ULTIMATE GUIDE TO WHY YOU SHOULD MAKE A WILL
You know you should have a will, but do you have one? If so, when was it last reviewed? We all know we should make a will, but most of us put it off. This can have disastrous consequences for your family, as this article explains. This article covers the English law position.
- Why you should make a will
- The benefits of making a will
- How to make a will
- When you might need advice
- Important considerations
- What happens after you die
What is a will?
A will is a legal document, which allows you to deal with how your assets are treated after you die. It also allows you to set out your wishes on other important matters. Ultimately, your will allows you to stipulate who gets what when you die. You can also use a will to avoid tax on your death.
Why should you make a will?
You know that it is inevitable that you are going to die one day. A will allows you to decide how your assets will be treated after you die, as well as other important matters. This can include:
- Who you want to receive your assets when you die
- How your dependant children are looked after
- Who is going to manage the paperwork when you die
- What happens if those you want to benefit die before you
When someone dies it is obviously a distressing period for their family. Having a will can help to make this time more straightforward than it might be otherwise. Often bereaved relatives find it difficult to make decisions. By having your affairs in order, you can take away a part of the stress of this period.
How many people do not make a will?
According to the BBC in 2011, only 3 out of 10 people in the UK holds a valid will. This shows that most people understandably prefer not to think about what would happen to their assets after they die. Tweet this.
Steve Wilkes, Head of Estate Planning at Silver Lining Estate Planning highlights a recent survey by the National Consumer Council. This survey revealed the reasons why people had not got around to making a will:
- 42% had simply not got around to it
- 15% felt they were too young
- 30% had never thought about it
- 9% did not want to confront the matter of dying
- 7% felt estate not large enough
- 4% still believe their estate would end up with the right people without a will
- 12% were worried about cost
Steve Wilkes says: “Some people think that the consequences will not be too bad if they die without a will. They presumably just think everything will go where they want it to with the minimum of fuss, which is of course not true.”
What happens if you die without making a will?
If you die without making a will, the law decides who gets your assets. This is called intestacy, or dying intestate. Ultimately, the law will determine how your assets are distributed after you die. This is unlikely to work how you would have planned. In some cases, intestacy can spell disaster for your family. If you are married, your spouse will get some of your assets, and the right to an income in some of the rest. Any children would get some of your assets, with some of the surviving spouse’s assets on their subsequent death. If you are not married, your partner gets nothing. Tweet this. This is a complicated area, and the overall message is that dying without a will means unnecessary complications. You should expect that your assets will not be distributed in the way you would have chosen.
What are the benefits of making a will?
If you make a will, you get to decide where the money goes after you die. This is important in terms of control, but it can also give you peace of mind that your loved ones will be provided for. You can make specific provisions for certain people, and ensure that money eventually ends up with the right people.
- Tax efficiency
A key benefit to making a will is the ability to avoid inheritance tax. Wills are a great way that you can put your tax affairs in order so you can ultimately shelter assets from inheritance tax.
- Practical issues
In practical terms your will enables your affairs to be put in order so your family does not have to do this after you are gone. Your will should ensure that the money ends up with your family more quickly.
Who are the main parties to a will?
This is the person who writes the will, and whose assets are dealt with in the document.
These are the people who are legally responsible to report to HMRC after your death, and to distribute the assets correctly according to the provisions of the will. Executors are usually family or friends, but can be legal professionals too (though this is not necessary). It makes sense to appoint at least 2 executors in case one of them dies.
These are the people who benefit under the will. They can be named, or be a class of person such as your children or grandchildren.
How to make a will
Here are the main ways that you can make a will. There are important legal steps to take to ensure that your will is legally valid. You may also need advice on how your wishes can be met in the most appropriate way.
This is the traditional method for making a will, but can be the most expensive. This is because solicitors are the best trained in legal matters, and have years of experience specialising in these matters.
- Will writer
Will writers are usually a cheaper option than a solicitor. However, they may not be as well qualified as a solicitor. Some will writers take the will instructions and use a solicitor to draft the will. Make sure you check the qualifications and method of the firm you plan to use.
- Do it yourself
Wills do not have to be drafted by a professional to be effective. However, this route can be fraught with problems. The rules surrounding wills are particularly complex, and you can easily slip up and make your will invalid if you are not careful. Also, you run the risk of making a drastic mistake in how you write your will. This could have unintended consequences for your family. You should only draft your own will if you have a simple estate, and only if you are confident that you know what you are doing.
The biggest mistakes people make with wills
According to Susanne Grimwade, a solicitor with Fisher Jones Greenwood in Colchester, the biggest mistakes that people make with their wills are as follows:
- The testator forgets to sign the will
- The will has not been dated
- The will has not been correctly witnessed
- The will does not correctly dispose of all assets in the estate
- Individual legacies in the will add up to more than the value of the estate
- A named beneficiary has died before the testator, and the will has not been updated
- The will has not been updated on marriage, civil partnership, divorce or separation
- The will does not provide for dependants
Any of these events could lead to significant issues with the distribution of your assets. It is likely that there would be unintended consequences as a result, along with legal complications. It certainly pays to make sure that the will is correct first time.
What makes a will valid?
To be valid, a will must satisfy these conditions:
- It is written by someone over the age of 18
- It is made voluntarily
- The person making the will has the mental capacity to make decisions
- It must be in writing
- It must be signed in the presence of 2 witnesses who must be 18 or over
- The 2 witnesses must sign in the presence of the person making the will
Importantly, you cannot leave the witnesses, nor their married partners anything in your will.
Why might you want to take legal advice before making your will?
You should take legal advice if you want to get your will done correctly. Most people’s situation is relatively straightforward, but you can have complicating factors, which make the need for legal advice all the more important.
- You are not married
The law in this area is particularly unkind to unmarried couples. See the section on intestacy, above. Without a will, your unmarried partner is unlikely to be entitled to anything from your estate.
- You have children from a previous relationship
If you have children from a previous relationship, you may want to ensure that your estate provides for them in some way. You may need advice on the best way to strike a balance between the needs of your current partner, and your children.
- You have a business
You business may pass to your family in the event of your death. This could create problems for both your family and your business partners. A will can help to deal with the practical aspects, so that all sides get what they want.
- You have dependants
If you have children under 18, or another dependant who cannot care for themselves, you may want to make a special provision for their care after you die.
- You have property abroad
Having property abroad can make your situation more complicated, especially as the overseas property may be treated differently in the other country. You should take specialist advice on both the UK and overseas situations.
- You are not from the UK
You should have a will which deals with the UK property. There are special rules surrounding how UK residents from other countries are treated. Again, advice could be key.
There are many issues to cover when you make a will.
- Informing and involving your family
You should involve your family in your decisions before you die. This can help to avoid any potential for misunderstanding or conflict after you die.
- Getting agreement of executors
You should get agreement from your executors that they are prepared to accept the responsibility of the position. They do have the right to refuse.
- Storing your will and other documents
A will is a legal document and your family will need to use this to deal with your estate after you die. Most legal professionals will offer you a secure storage facility, but you can hold on to the document yourself. Just be sure to tell your family where it is! You should also keep other important documents such as policy documents, share certificates and the like in a safe location.
- Reviewing your will
Think back 5 or 10 years. How was your personal and financial situation different then? As your circumstances change you should regularly review the provisions of your will. This ensures that your will takes account of your changing situation, as well as the law. You should probably update your will if you get married or divorced, have or adopt children, set up a business, buy a property, or if an executor dies. You should destroy old wills when they have been overridden.
Getting divorced automatically amends your will, so you need to make new arrangements once the legal divorce formalities complete.
Can you change your will?
You cannot change a will once it has been witnessed. If you need to make changes to your will at any stage you can do so long as you are mentally capable of making a decision. You can do this in one of 2 ways:
- Making a new will
Any new will normally overrules a previous will. You should destroy the old one to avoid confusion.
- Adding a codicil
You can add an addendum to a will called a codicil. This is a separate legal document which changes specific aspects of a pre-existing will. You can use this method to change a part of your will without the need to re-write the whole document. For example, you might use a codicil to change who gets a specific asset. The rest of the will remains unchanged.
Can you alter someone’s will after their death?
You can change the contents of someone’s will after they die. This is a complex area, and you should seek legal advice if you want to do this. The process is called a variation of a will (using a Deed of Variation). Essentially, if all beneficiaries under the will agree, you can change the contents of the will up to 2 years after the death of the person who wrote the will.
Can you challenge a will?
You can challenge a will if you believe that the will was invalid, or you should have been provided for. This is a complex area and you should seek legal advice as soon as possible. Normally, you cannot challenge a will up to 6 months after the date the probate has been granted.
What happens with a will after someone dies?
When you die, the executors are responsible for distributing your assets according to the provisions in your will, after tax and creditors are paid. They may also need to apply for probate if your estate is over a certain value or is more complex. Finally, the executors must report to HMRC on your estate and pay any inheritance tax due.
Applying for probate
Probate is the permission given by the Probate Service (a branch of the Government), that the estate may be distributed. After the death of the Testator, the Executors must complete paperwork on the estate and get approval from the Probate Service that everything is in order. This is usually done by submitting information in advance, and then attending an interview.
Probate can take a few weeks for straightforward cases. For more complex cases, the period can be extended to years.
If there is no will, or it is not valid in some way, you must apply for Letters of Administration. This is a separate process, and is slightly more complicated.
What does an executor need to do?
- Calculate the estate
The estate is the total value of assets that the person owned. This can be property, shares, cash, belongings and investments. Certain assets such as property held in a joint tenancy, pensions or life assurance in trust may not pass into a person’s estate on death. Usually joint accounts pass automatically to the survivor. This can be a complicated area. You will need to gather all the documents relevant to the estate, such as bills and assets.
- Apply for probate (if necessary)
- Collect money due and pay all bills outstanding
This may include income due to the deceased during their lifetime, plus outstanding bills. The executors must pay legal and other bills.
- Work out and pay any inheritance tax due
This must be paid prior to the distribution of the estate
- Distribute the remaining estate to the beneficiaries
The executors must follow the terms of the will.
The executors are responsible for paying all tax due by the deceased. This includes outstanding bills not yet paid, such as income tax or capital gains tax. The executors must also calculate and pay any inheritance tax arising from the estate.
We often see issues which regularly come up in relation to wills and estate planning.
Certain assets you currently hold may be held within a trust on death. This should mean that these assets do not form part of your estate for tax purposes. The assets will pass to the trust (and then on to the beneficiaries of that trust) separately to the provisions of your will. You may need legal advice in this area.
- Life assurance
Life assurance may or may not be paid into a trust on your death. If the policy is not held in a trust it will form part of your estate as cash for tax purposes when you die. This could increase the inheritance tax your family pays when you die. You can set up a trust after a life assurance policy is set up, and this could save you a lot of inheritance tax.
Your house and other property could be held as a joint tenancy if you own it with other people. This means that when you die the house passes automatically to the survivor(s). This happens outside of your will. If your property is held as a tenancy in common, this means that your share of your property passes as an asset in your will. Previously, it was common for legal professionals to recommend that you set up a tenancy in common as a tax saving measure. This is less common now as the rules have since changed.
Pensions tend to be held in a trust, meaning that your funds before retirement should pass to your nominated beneficiaries free of tax, outside of your will. You should check your documentation because you may have selected your beneficiaries many years ago. This is particularly true if the plan was set up before you were married, or if you have since divorced. Your family could find that your pension money goes to someone else when you die. Also, check how the pension benefits are paid on your death. In some older schemes, the fund value might not pass to your family; a return of premiums might be paid instead, which is likely to be much lower than the fund value.
- Care fees
If you are concerned about the likelihood of future care fees, you can take steps at the time of writing your will to protect assets from any assessment for the costs of care. This is a complicated area, and you should take legal advice.
- Lasting Powers of Attorney
A Lasting Power of Attorney is a legal document which allows a trusted person to take control of your affairs if you are unable to do so. This might apply to you if you are too ill to decide on medical treatment or financial decisions. These documents are very useful to help you and your family deal with the practical implications of serious illness. They are often drawn up alongside wills. Legal advice is essential.
If you are interested in any of the issues raised in this article, why not contact us? We have experience in many of these issues, and can refer you to an appropriate specialist if you need further help.
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