Make sure your wishes come true

Incredibly, the majority of adults (55%) have not made a will[1]. Despite it being quite a morose subject to think about, it is vital to consider the practical and financial implications of your death and make provisions for your loved ones, as well as ensuring that your most treasured possessions go to the people you want them to.

There are many other good reasons to write a will. For instance, you may wish to specify a particular guardian for your children, should they not have a surviving parent. You may wish to specify whether you want a burial or cremation at your funeral, or maybe whether you want to leave a donation to a particular charity. Writing a will is not only a way to ensure your wishes are acted properly upon when you die, but it can also help to mitigate an Inheritance Tax liability.

Without a will you have no guarantee that your money and possessions will go to the people you want to benefit from them. Should you die without a will (or ‘intestate’ as it is known), your estate may not automatically be passed down to your next of kin, which is a common belief. In fact, the law will decide who is entitled to what and this may go against your wishes.

The rules of intestacy are complex; the bulk of your estate will go to your spouse, or if none, your children. If you don’t have either, then it will go to specified blood

relatives. If you have a large estate, your spouse is only automatically entitled to the first £125,000 under the law of intestacy; your spouse can then take half of the

remainder (as a life interest), the rest of which will divided up between your surviving children, providing they are not minors. If you do not have any children, your spouse is entitled to the first £200,000 of your estate outright, with a life interest in half the remainder; the rest will be divided up between other close relatives.

Therefore, your spouse may get less than expected, or not as much as you would wish them to, and this is one reason to specify in a will who should get what, rather than rely on the rules of intestacy. A registered civil partnership between same-sex couples has the same legal provisions as a marriage and therefore the usual intestacy rules apply.

In the modern era, many people have unmarried partners, and under the laws of intestacy, unmarried partners do not have any automatic rights to any part of your estate. Therefore, he or she will have to establish a claim under the Inheritance (Provision for Family and Dependants) Act 1975, which can be costly, time consuming, and isn’t always successful. Therefore, if you are not married to your partner, it is particularly important to write a will.

It is also possible to die ‘partially intestate’. This may occur if you have failed to deal with all of your estate in your will, or if a beneficiary dies before you do, or if you get divorced (meaning your ex-spouses legacy becomes invalid as a result). Therefore, once you have drawn up your will, changes to circumstances (e.g. marriage or divorce,

having a child, moving house, the death of a possible beneficiary) means it is extremely important to keep it up to date to ensure that your wishes are still valid.

One of the most effective and convenient ways to reduce the amount of Inheritance Tax payable is to use your will. The general idea is to make use of the Nil Rate Band allowances (currently £285k) available to both spouses.

There are different kinds of wills for different situations:

• Single Will – a will for single people. This enables you to leave what you want to who you want. However, this does not have any Inheritance Tax benefits.

• Mirror Will – for couples who wish to leave all their assets to each other, although their joint estate needs to be significantly below the nil rate band (£285,000).

• Discretionary Will Trust – allows a married couple to utilise both nil rate bands and provide savings in Inheritance Tax.

Will writing is not necessarily as complex, or as time consuming, as you may imagine. Many companies offer the chance to fill in the forms in the comfort of your own home at your own pace, then send your forms to a reputable solicitor who will draw up your will for you.

1. Skipton Building Society, October 2005.

Example:

Mr B, a dentist, and Mrs B have been together for 24 years. It is the second marriage for both of them, and between them they have eight children and 17 grandchildren. Although they were well aware of the potential problems of dying intestate, it was just ‘getting round to actually organising it’ that meant they did not, until recently, have a will. Mr and Mrs B would be shortly travelling to Australia to visit family and wanted to ensure that if anything happened to them, there would be no doubts as to how their estate was to be distributed.

It was important for Mrs B to know that her late mother’s treasured possessions went to her own daughters rather than her step-daughters. Mr B was also able to specify that items of particular sentimental value to his family went to his daughters. Mr and Mrs B also wanted to use their will to mitigate their Inheritance Tax liability. They were able to complete the forms in the comfort of their own home and once the will was complete Mr B had more peace of mind.

Vicky Simpson works for Skipton Financial Services Limited, a wholly owned subsidiary of Skipton Building Society and authorised and regulated by the Financial Services Authority.

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