Wills. Something that we put to the back of our minds. Something to sort out later on when you are old and grey.
As it has been said, the only certainties in life are death and taxes – and a certain Mr. Trump has shown that even taxes may be optional. So, we get back to the tricky subject of death or, more accurately, the timing of death. Because, although death may be certain, the timing of it is a very inexact science and a lack of planning could have serious ramifications for your family. Sorting out a Will should be a priority in your financial planning.
If you die without a will, known as dying intestate, your estate will be dealt with by the Intestacy Rules.
What does this mean?
Firstly, a friend or relative will need to sort out the estate you have left behind. They will need to apply for a grant of letters of administration, to put them in charge of collating and administrating everything before subsequently distributing the estate according to the intestacy rules.
They have to value any assets, such as property, savings, and share portfolios. They are then required to work out the value of any gifts that the deceased gave away in the seven years before they died. And lastly, working out any debts and deducting these from the value of the person’s estate. They will also oversee paying any inheritance tax that may arise.
All done by an administrator you did not choose and who did not volunteer for the job beforehand.
But up to this point, it is pretty similar to what you would expect. However, once we look at the distribution of funds then we begin to see where things might deviate from what you would expect to happen.
As there is no Will to guide where things should pass, the estate is instead shared out according to the intestacy rules only. Importantly, it restricts the level to which specific people can benefit and who can receive proceeds.
Initially, your money will pass to any married or civil partners, as long as you are still married or in a civil partnership at the time of death. Should there be surviving children or grandchildren and your estate is valued at more than £270,000, then your surviving partner will only receive the first £270,000 of the estate and personal property and only half of the remaining. The other half of your estate above £270,000 will pass down to any surviving children immediately, which may not be something you want to happen.
This can cause real issues and conflicts between surviving parents and the children, all of which could have been avoided with a Will. Additionally, it can also result in an unexpected and avoidable bill for Inheritance Tax. Whilst your spouse’s share of the estate will pass free of tax, your children will have to pay Inheritance Tax if their share of your total estate is above your nil-rate band of £325,000.
Additionally, whilst those you care about such as cohabiting partners, brothers, sisters, carers, or even stepchildren are not entitled to anything from the estate under intestacy, any natural-born child regardless of contact with the parent is able to claim.
A Will solves a plethora of issues. It allows you to choose who administers the estate once you have gone, what they should do with the estate, who gets what, and saves on tax.
It’s not a matter of will you or won’t you. It should simply be a matter of when.
If you would like to discuss your Wills with us and one of our Wealth Strategists will be pleased to go through your options with you.