A badly thought out/ poorly drafted Will, or no Will at all, can create lasting problems for your loved ones.
The points outlined below apply to England and Wales but for Scotland and Northern Ireland there may be other issues to take into account.
Why make a Will?
The main reasons for making a will are as follows:
- to ensure that your possessions go to the people and/or organisations that you wish to benefit;
- to choose the persons that you wish to administer your estate and to grant them appropriate powers to carry out your wishes;
- to appoint guardians for minor children;
- to minimise the tax burden on your beneficiaries; and
- to make stipulations with respect to your funeral.
The dangers of dying intestate
Without a valid Will on death everything you have will pass to relatives according to fixed rules.
If you die intestate a lifetime companion to whom you are not married/in a civil partnership will receive nothing and would have to go to court to pursue a claim.
If you are married/in a civil partnership and have children should you die intestate only personal chattels and the first £250,000 will go to your spouse absolutely. Your spouse/civil partner would also have a life interest over half of the residue. If you are married/in a civil partnership, with no children but with surviving parents, siblings (or their descendants) the first £450,000 plus half of the residue will go to your spouse/civil partner absolutely.
If you have no spouse, children, surviving parents or siblings then a distant relative – even one with whom you have had little or no contact – may be entitled to a share of your estate. Finally, if you leave no relatives at all, everything will go to the Crown, Duchy of Lancaster or the Duchy of Cornwall.
Should you die intestate your executors will also be chosen according to fixed rules and they may not be the people most suitable to act; indeed, they may well be people whom you would never have chosen.
Who will look after your children?
You will need to appoint guardians for children who are under 18. This is particularly important if a woman is not married to the father of her child. For births since 1 December 2003, if the father is named on the birth certificate then he has parental responsibilities and will therefore be the guardian. This is not the case for births prior to that date.
Guardians will also be necessary if both parents die at the same time, for example in a motor accident.
Making a Will
To make a Will you need to consider a host of issues concerning you as an individual and your family circumstances, your estate, intended beneficiaries and your executors.
We run through below some key issues that you should consider so that the instructions you provide ensure the Will drawn up for you meets your requirements. When you have a Will that you are happy with we would suggest that it is reviewed from a tax perspective. It is possible that tax efficient changes could be made, which whilst altering the Will would do so in a way that you are comfortable with. We would be happy to advise you.
What have you already given away?
You should keep an ongoing record of any significant gifts of assets and who received them. This will assist you in determining what additional gifts you may wish to make in your Will. In addition, gifts made within the seven years before your death can affect the inheritance tax position.
Your estate
To consider your Will planning it is worth thinking about the following issues.
How much is your estate worth?
List all the things you own (whether located in the UK or abroad) with an estimate of their value. This will give you an idea of the extent of your estate and may help you decide how you wish to divide your estate amongst those you wish to benefit.
If you are the life tenant of a trust the assets with respect to which you have an interest may form part of your estate on death. You should take specific advice.
What can you dispose of?
You may not have complete freedom to leave some assets exactly as you wish. If you own your home (or any other asset) as 'joint tenant' with someone else, on your death your share will generally pass automatically to your co-owner regardless of what your Will says. You may also have shares in a family company or an interest in a business partnership which has to be disposed of according to a shareholders' or partnership agreement.
If you own foreign property local law may stipulate how the property will pass on your death (forced heirship provisions).
Who do you need to provide for?
You will probably want to provide for any children you have and may want to make special provisions for minor children. If you are married/in a civil partnership or engaged, you may want to benefit your spouse/civil partner. If you are unmarried you may want to provide for a long-term partner or fiancée (though note that marriage/entering into a civil partnership can revoke a Will – see later section).
Stepchildren, surviving parents, siblings or other relatives, godchildren, close friends or charities may also feature in the list of people or organisations you wish to benefit on your death.
Dividing your estate
If there are specific items or sums of money that you wish to be given to any particular people or charities, these should be listed. Beneficiaries should be clearly identified, with each beneficiary's full name, current address and their relationship to you. For charities, note the registration number.
Will trusts
There are specific tax rules pertaining to trusts. These rules can be complex and vary depending on the type of trust. When considering a new Will or reviewing your existing Will you should understand the tax implications. We would be happy to advise you. In particular, the IHT rules applicable to trusts changed dramatically in 2006. To ensure it is still tax efficient your Will should have been reviewed in the light of these changes. If this has not happened we would be happy to carry out a review for you.
Gifts of residue
Residue is what is left over when all specific gifts have been distributed and debts, taxes and expenses associated with the estate have been paid. A Will should always include a gift of residue, because nobody knows in advance exactly what their estate will comprise on their death. A gift of residue will also mop up any specific gifts which fail, for example, if a named beneficiary dies before you.
Executors and trustees
Your executors will take charge of your estate, wind it up and distribute it according to your wishes, and they are granted certain legal powers regarding investment and insurance. If any beneficiary is under 18 when you die, the executors may also act as trustee for that person until they come of age.
You may appoint anyone to be your executor who is over 18 and has mental capacity. You may wish to have two executors, your spouse and one or more of your adult children or other relatives or friends. If the estate is likely to be complicated or you are making a trust to take effect on your death, we recommend that you appoint a professional to act jointly with a family member.
Your executors should have agreed to act and know where your Will is kept.
Formalities
Once you are happy that the Will meets all your requirements it will be necessary to sign it. You should bear in mind that for a Will to be valid a number of requirements and formalities must be observed. Failure to meet these requirements will render your Will invalid. An invalid Will is the same as having no Will at all so your estate would pass under the intestacy provisions with all the negative consequences explained above. You should take advice to ensure you have complied with all the legal necessities.
Marriage/entering into a civil partnership can revoke a Will
The general rule is that any pre-nuptial Will is automatically revoked. The exception to this is where the Will was made specifically in contemplation of that marriage.
Note that if you divorce after making a Will your ex-spouse is treated as though he or she had died before you, and gifts made to them fail.
When might you need to change your Will?
You should review your Will regularly and update it whenever family circumstances change or there are changes in the law. For example:
- if your children marry or new grandchildren are born, they may not be covered by the provisions of your existing Will;
- if you are separated, but still married, the Will and any gifts made to your estranged spouse still stand, so he or she, and not any new partner, will benefit;
- if there are changes in tax law your existing Will may no longer be tax efficient.
Better to be organised
It will be easier for your family to know the extent of the assets which they will be required to deal with. You should list any life or endowment policies and pension arrangements and prepare a note setting down what happens to the proceeds of these on your death. Keep all documents relating to your investments together and make sure that your executors will be able to find them.
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.
