Discussing your mortality is not the easiest subject to bring up with friends, family and acquaintances. Consequently, many people pass away without leaving instructions, even though the benefits of writing a will are well documented. Aside from the potential legal complications, writing a will has numerous advantages.
Many of us automatically assume that those we leave behind will understand how we would prefer our assets to be distributed upon our death. You may have already promised an individual a cash payment or assets but have not formally noted this on record. Unless there are specific instructions, in the event of your death, it is unlikely that your estate will be distributed how you would have wanted when alive.
As standard practice, many people will now review their will and inheritance tax situation at the same time as their investments, allowing adjustments and tweaks to be made along the way.
You will often hear about the role of the executor of your estate and their control over the distribution of your assets. Typically, an executor will be somebody you trust, such as a close friend or a professional party, such as a solicitor. While they have a degree of flexibility regarding the distribution of your assets, and slight adjustments to your wishes, they will likely honour your instructions.
Appointing an executor allows you to maintain a degree of control, which can be lost if you have a will but no executor, or nor will at all. The situation can become complex when no executor is named or they cannot fulfil their duties for various reasons. Typically, one of the beneficiaries would step forward to take on the role with the support of others named in your will. However, if no agreement were reached, the courts would become involved and appoint a beneficiary as executor or an unconnected third party.
The rules of intestacy relate to an individual who dies without leaving a will. There are statutory rules for this in England and Wales, although they differ in Scotland. Unless you leave a will, it is unlikely that your assets will be distributed as you might have hoped.
There are numerous issues to consider concerning intestacy:-
There are also additional rules and regulations regarding grandchildren, great-grandchildren, and other relatives. If there is no will and you have no surviving blood relatives, your entire estate will pass to the Crown.
It can be dangerous to assume anything regarding legal procedures, especially the distribution of your estate upon death. For example, an unmarried partner does not have the same legal rights to automatic inheritance as a married partner. Therefore, if you were to die without a will, there is every chance your unmarried/civil partner would not benefit to the extent you might have assumed. Consequently, it is crucial that you write a will which includes all beneficiaries and levels of inheritance.
We have seen situations where unmarried/civil partners have pursued court action concerning inheritance, but this can also be a legal minefield. To save any confusion, ensure that your partner is added to your will as a beneficiary.
Many people provide income for dependents, but it is dangerous to assume that this will automatically continue upon death. If you wish to provide income for dependents after your death, this must be noted in your will. You may have investments that attract regular dividends or property assets with significant rental income.
Whatever the situation, it is essential to protect the dependent and the origins of the income in question. Don't let your executor sell your real estate assets if that is where earmarked revenue comes from!
Whether you have children, step-children, grandchildren or adopted children, you may choose to make individual provisions for each child. Where the child is a minor, it is common practice to appoint a trustee to protect their inheritance. Whether the child is given access to inherited funds at a certain age, or perhaps income and capital releases are staggered over a certain period, this is something you can define in your will.
If you have children from a previous relationship, discussing this with your current family is probably worthwhile, so there are no shocks or surprises when the will is read.
In a perfect world, your children would have flown the nest before your death, and the subject of guardianship will never arise. But, whether you have young children or children with specific long-term needs, it may be sensible to specify guardians.
If guardians were required, immediate or distant family members would typically step up to the mark. However, we live in a day and age where people are spread across the country and worldwide. Consequently, it is important to take nothing for granted when considering the guardianship of your children in the event of your untimely demise.
Unfortunately, whether through innocent discussions or promises made but not recorded, if you fail to leave a will, this will likely lead to arguments between family and friends. This has the potential to rip families apart, alienate and isolate long-term friends and has been known to result in legal action. When contemplating whether to write a will, consider how you would feel if your estate was dragged through the courts, friends and family fighting and legal expenses building.
These are potentially sizeable legal expenses which would/should have been part of your estate and ordinarily gone to your loved ones.
Whether or not you have children, it is not uncommon for the family home to be held in the name of an individual, even if it is a mutual asset in practice. This could be for several reasons, for example, historical or tax purposes. Therefore, to safeguard the family home, specific instructions should be written into your will. Unless clear instructions are left, you may find that the family home is sold to cover a tax bill which is the last thing you wanted.
When writing your will, you should assume that you are starting with a blank canvas with no legal rights or obligations. Therefore, include all parties whom you wish to benefit from your estate and clearly define their entitlement.
While the inheritance tax liability on your distributable estate cannot be impacted by a will, creating a will should prompt a review of your potential liability. There are ways and means of reducing any tax liability, including using gift allowances, pensions and trusts. The government often tweaks inheritance tax regulations, therefore, seeking professional advice while structuring your will is strongly advisable.
Many automatically assume that those looking to manage their affairs regarding potential inheritance tax liabilities are doing something wrong. However, it is a perfectly valid consideration because it will ensure that the maximum amount of funds/assets is available for distribution amongst your beneficiaries. The more spent on tax liabilities, the less to distribute to your chosen beneficiaries.
In the midst of grief, trying to put together a funeral service which you “would have wanted” can be challenging. For example, are there any particular friends you would have invited? Perhaps there are some that you would prefer not to attend your funeral?
Since death is difficult to discuss, some people are unaware of whether their partner would prefer to be cremated or buried. The subject of a religious or non-religious funeral can also be tricky. Then we have the wake and any private celebrations of your life. Many people who choose to live overseas in the final years of their life may prefer to be repatriated upon their death. On balance, it would be advantageous to leave clear instructions in your will clarifying your preferences.
Writing a will is the perfect opportunity to leave gifts to one or more charitable organisations. It may be that a charity has helped you in the past, or they may be close to your heart for some reason. However, unless you specify donations to charitable organisations in your will, it is doubtful that contributions would be paid voluntarily after your death.
There may also be various tax breaks associated with charitable gifts that will enhance any donations. But, again, these are issues you can discuss with your financial adviser/wealth manager when looking to structure your will.
In the modern era, individuals are more likely to own what are defined as "digital assets". These non-tangible assets are created, traded and stored in a digital format, possibly associated with cryptocurrency and blockchain investments. However, the valuation, transfer and disposal of such assets can be complex. Consequently, it is vital that your executors have access to your accounts as soon as possible to clarify the legal position and what needs to be done to sell or transfer the assets.
Most of this article has focused on the benefits of writing a will instead of regularly updating your will. Unfortunately, many people fail to update the beneficiaries of their estate, with funds often going to previous partners. This may be to the detriment of your partner/family at the time of your death. While there are occasions where wills can be challenged in court, there would need to be a strong reason for this to proceed. A failure to update the beneficiaries of your estate could be classed as "bad admin", and it may be difficult to find a legal reason to challenge this.
Depending on how previous relationships ended, parties can be amicable, with assets going to the "right" people. However, don't bank on it!
A will is a very personal document that allows you to leave specific amounts of cash or items for friends, family and close acquaintances. However, you may have verbally promised a particular item to a friend or family member but not included this in your will. Unfortunately, unless other parties were made aware of the verbal promise, your wishes are unlikely to be fulfilled.
While it is impossible to cover all scenarios which may impact the distribution of your assets on death, we have covered a wide variety in this article. In essence, you need to include all beneficiaries in your will and the level of entitlement, whether this is all or part of your estate, taking nothing for granted. Where there is confusion, this will likely lead to disputes; where there are disputes, this will likely lead to legal action. A simple, clear, concise will can avoid this.
Here at Assured Private Wealth we have an array of expert advisors on hand to walk you through the challenges of writing your will. If you require further assistance, or have any questions, we would welcome the opportunity to speak with you.
Call us for a friendly chat on 02380 661 166 or email: info@apw-ifa.co.uk
