UK: “Make A Will, Who Me?”

Last Updated: 17 March 2009

Everyone Should Have A Properly Drafted Will

But only about a third of the population actually makes a Will. Even out of those who do make Wills, a substantial number simply buy a form from a law stationer for a couple of pounds for a "do it yourself" job. Our aim here is to explain to you why everyone should have a professionally drafted Will, to describe some of the problems which arise if people do not make Wills or rely on home-made efforts and to explain the process which we at Finers Stephens Innocent LLP adopt when you instruct us to prepare a Will for you.

Intestacy

If you die without making a Will you are described as "intestate". In this situation the law prescribes a set of rigid rules for the division of assets between your spouse, any children and possibly other relatives. These rules of "intestate succession" virtually never correspond with the arrangements which a properly advised person would include if they were making a Will. The intestacy rules come on a "one size fits all" basis which means that they fit virtually no family we know.

What About Home-Made Wills?

These have generated an enormous amount of litigation over the years, with families arguing over the interpretation of unclear or incomplete instructions.

We will describe below the factors which might make you want a properly drafted Will. When you think that most of these provisions are absent from the intestacy rules or from homemade Wills, you will begin to appreciate the benefit which a properly drafted Will can confer on your family.

Choice Of Executors

Your Will enables you to select the people who should handle your affairs after your death - either your spouse or other family members, professional advisers or close friends. In many cases clients choose to appoint one or more partners from FSI as executors based on our long experience of handling estates. The professional executor then acts with a family member so that all aspects of the administration are covered.

Guardians

Perhaps the most important choice parents can make is selecting people to be guardians for their young children. While a surviving parent will normally act as sole guardian, if children are orphaned it is essential that you have chosen the right people to take day-to-day care of them. In case the people you choose are unable to take on the responsibility we recommend you also nominate reserve guardians. Guardians are usually different people from the executors, the latter being responsible for the financial side of looking after the family.

Achieving A Balance In The Family

People making a Will have to balance up competing interests in the light of their own family situations and resources. For example:

  • One or more children may have special needs
  • Your children may be very young and estate funds may need to be invested for their benefit for many years
  • There may be children from a former marriage
  • You may have concerns about the stability of your children's marriages and possible claims by a son-in-law or daughter-in-law
  • You may have doubts about the financial stability of your children in which they may need protection against dissipating the funds
  • You may be concerned that family assets will be lost if the surviving spouse remarries
  • The surviving spouse may have very substantial resources of their own
  • You may want to leave legacies to particular people to whom you feel grateful
  • You may want your personal belongings divided between the family in a particular way . You may have aged parents or other relatives for whom you need to provide

The Private Client team at FSI regularly encounter all these dilemmas. We can assist you in spotting the problems and suggest ways to resolve them.

Business Arrangements

You may be a shareholder or partner in a business, and there may be special terms in the articles of the company or partnership agreement. Then the provisions in your Will need to be integrated with what you have agreed with your partners or co-shareholders. Perhaps you and they have never considered what would happen if one of you died. Could that compel the survivor to buy out the estate of the deceased, or force a sale of the whole business? You need to set up fair and workable arrangements to avoid a crisis or arguments in the future.

Shares in trading companies and most business assets attract Inheritance Tax Business Property Relief. In most cases the relief is 100%, which is equivalent to complete tax exemption, and is thus extremely valuable.

The provisions in your Will need to be integrated with your commercial arrangements, and structured so as to maximise Business Property Relief.

You may be the sole proprietor of a business, in which case we can help you to think through the arrangements which would apply on your death - should the business be sold or carried on, what arrangements would be made for the staff, and how would your beneficiaries achieve maximum benefit from what you have built up?

Special Property And Foreign Property

Your estate may include assets which need particularly careful handling on your death - for example, literary copyrights and patents, foreign assets, jewellery and other chattels of particular value, and much-loved pets. We can help you devise suitable arrangements for dealing with these assets so as to give you peace of mind and to prevent disputes in the family.

If you own property abroad, such as a holiday home, you will need a Will in that country, and ensure that your English Will and your foreign Will do not accidentally revoke each other. We practice English law and do not advise on the law of overseas jurisdictions. However, we are members of Meritas, a worldwide association of independent law firms, and where necessary we can involve other Meritas members to obtain such advice on your behalf.

Inheritance Tax Liability On Your Death

Under present Inheritance Tax legislation the first band of your assets ("the nil rate band") passing to your beneficiaries is tax free. Above that, Inheritance Tax is chargeable at a flat rate of 40%. This is subject to various exemptions, the most important of which cover assets which pass to your spouse, business assets as already mentioned, and bequests to charity.

We will be able to calculate the potential Inheritance Tax attributable to your estate but we will need you to complete Part 2 of the accompanying questionnaire. In particular, if you have been married (or in a civil partnership) and your spouse (or civil partner) died before you, we will need information about their estate as well. (See Part 1, question 13). If they did not fully utilise their nil rate band it can be carried forward and added to your nil rate band which can reduce your estate's Inheritance Tax liability. The same information is required if you have been married (or in a civil partnership) more than once and that person predeceased you.

We will also discuss with you whether action can be taken during your lifetime to avoid the Inheritance Tax which would otherwise be payable on your death. There are a variety of arrangements which we use successfully for many of our clients, and we will be pleased to discuss these with you in more detail.

People Who Need Protection

When you think about it, many families include people who need particular protection, whether minors, those with disabilities, aged relatives, or children who are "not good with money". Some of these problems may be short-term, as in the case of children who will hopefully grow up to be mature individuals and able to look after their own funds. Others may be permanent and require solutions which will endure for the long term, as in the case of children with disabilities. Many of these problems can be solved by the use of appropriate family trusts incorporated into your Will, arrangements which can be as simple or complex as the case requires.

The Finance Act 2006 introduced major changes in Inheritance Tax. The new measures are complicated and have a wide impact on the whole field of Wills, estates and trusts. It is still possible to postpone your children inheriting capital beyond the age of 18. However, the ability to do so can incur a new Inheritance Tax charge at a maximum of 6% every 10 years. The Inheritance Tax charge will depend upon the age you wish your children to inherit the capital and there are ways in which the Inheritance Tax charge can be reduced and we can advise you on these options in detail.

Life And Pension Policies

Most people have life and pension policies, and usually pension policies include death benefits in case you die before reaching pension age. Sometimes the amounts payable under these policies and death benefits can be as big as the rest of your estate or greater.

In addition, if you should die before retirement, these benefits can usually be paid out to your heirs free of Inheritance Tax, which makes them even more valuable.

It is essential that the arrangements for dealing with these should be integrated with the other provisions in your Will. We will suggest a review of your policy documents to check whether they have been written in appropriate trusts and to ensure that policy benefits are treated in the most tax-effective way possible and directed to the right beneficiaries.

If you were planning to take out a new insurance policy and put the proceeds in trust for your family so that the policy money is not subject to Inheritance Tax on your death, we will advise you on the process and how to ensure this can be undertaken without additional Inheritance Tax charges.

Joint Property

English law provides two ways of holding property, particularly land and houses. If you and your co-owner are "joint tenants" the property goes automatically to the other person on your death, irrespective of what you have said in your Will. If you are "tenants in common" your interest in the property goes to the beneficiaries of your Will and not to the co-owner. It is essential that any important property holding, such as your home, be reviewed so that the property passes in accordance with your wishes and not by an automatic legal process.

Claims Against Your Estate

Generally English law allows people to choose who they want to benefit by their Wills, and for what amounts. However there is an opportunity for the court to intervene under the Inheritance (Provision for Family and Dependants) Act 1975 if reasonable financial provision has not been made for certain people. When you make your Will with us we will consider with you whether there are any possible claims of this kind and how best to deal with them. We also regularly advise claimants who may have possible rights under the 1975 Act. Where someone has made a Will under duress or unreasonable influence the Will may be challenged by a disappointed beneficiary and set aside by the Court. We are experienced in advising in such situations.

If you wish to give a major benefit to someone who is not a family member, or to "cut someone out", there are steps you can take to reduce the risk that your Will may be challenged. These are areas in which we will be glad to advise, in strictest confidence of course.

Flexible Arrangements

It is quite impossible for some people, in their particular situations, to lay down a hard and fast set of rules for division of the estate. Assets may be changing in value, the personal circumstances of your beneficiaries may be subject to fluctuation, or you may expect your own personal circumstances to change over a period. In this situation a Will trust may give invaluable flexibility to your estate. Where discretionary trusts are used we will normally assist you to prepare a detailed Letter of Wishes explaining to the trustees how to deal with your estate in changing circumstances.

Making It Valid

Every year there are press reports of disputed Wills, whether because they are not executed correctly or because the testator has been improperly influenced, or the Will did not express their intentions correctly. Part of our job when helping you to make a Will is to ensure that it is valid and that your family will not be involved in expensive and embarrassing litigation.

Reviewing Your Will

Your family circumstances change. A child or grandchild may have been born, there may have been a divorce, or a relative may have died. You may no longer own assets you owned a few years ago or you may have acquired new possessions. The law - particularly tax law - changes regularly. All these things may affect the arrangements you have made in your Will. So it should be reviewed whenever there has been a significant change in family circumstances and in any event at least every five years. And remember that marriage automatically revokes your Will, which will need to be rewritten, and on divorce all references in your Will to your former spouse are automatically deleted.

The Living Will And Personal Welfare Lasting Powers Of Attorney

Many of our clients are concerned about the medical treatment which might be administered if they become seriously ill. They want to opportunity to express their views while they are still in good health. We do not produce our own Living Will document but have proforma documents produced by charities which you can complete with the assistance of your General Practitioner.

Also, you can now make a Personal Welfare Lasting Power of Attorney and we can advise you on the implications of this document.

Lasting Powers Of Attorney

On 1 October 2007, Enduring Powers of Attorney were replaced with two different documents, each called a Lasting Power of Attorney. One relates to personal welfare and the other to financial matters. You should consider making a Lasting Power of Attorney, appointing who you would like to look after your affairs in the event that you are unable to do so yourself, perhaps because of a serious illness or incapacity. You could also make a personal welfare Lasting Power of Attorney which allows your attorneys to make decisions about personal care, welfare and medical treatment, for example.

We can advise you in more detail in relation to Lasting Powers of Attorney. If you made an Enduring Power of Attorney prior to 1 October 2007 this will still be valid and does not have to be replaced with a Lasting Power of Attorney.

Lifetime Trusts

As well as including provisions in your Will, it may be appropriate for you to set up a lifetime trust, either to protect family members or to mitigate tax. We have specialist expertise in drafting appropriate trusts and using them to mitigate tax, which we will be happy to discuss with you in more detail.

Again, the Finance Act 2006 introduced major changes in Inheritance Tax and its impact on the creating of trusts. We will be able to advise you on the Inheritance Tax implications of creating a trust in certain circumstances, but in any event you can still create a trust and transfer assets to it up to your nil rate band without incurring an immediate Tax charge.

Trust Administration

We regularly act as trustees of family trusts. Some of these were established many years ago and others have been set up in recent years as part of the various arrangements described above. We can either provide all the trustees of a trust or work with other professionals or family members as co-trustees. When acting as trustees we take a close personal interest in the welfare and needs of the beneficiaries.

Disputes Over Wills And Trusts

Although what we have written above has been from the standpoint of a person making a new Will or setting up a trust, we regularly advise executors, beneficiaries and even disappointed beneficiaries on their rights and possible claims. In such cases our private client department works closely with litigation colleagues, using not only the powers of the court but also arbitration and mediation where these seem most likely to produce a speedy, private and cost-effective outcome.

Charities

We have a specialist charities unit within our private client department, dealing with the formation and administration of charities in their various forms, the problems facing charity trustees, tax issues affecting charities and the use of trading subsidiaries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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