A will is a legally binding document that manages and plans distribution of your assets, such as investments, money, property and possessions, upon your death. A will can also appoint guardians for your young children so that they are cared for should you pass away before them. Essentially, a will ensures that any wishes you have regarding the above are made known and expressed after your death. A will can also help to ensure your estate doesn’t pay any unnecessary inheritance tax.
| What can I put in my will?
In your will, you can state:
- who is to inherit your assets such as your possessions and money (also known as your estate);
- certain individuals you wish to administer and distribute your estate (known as your executors);
- who you would like to look after any assets left to children (known as your trustees);
- at what age children become entitled to their inheritance;
- any guardians to care for your children or elderly family members;
- funeral wishes, such as a burial or cremation.
| Why should I have a will?
If you do not have a will in place, you will die ‘intestate’. This means that your estate will be shared and distribute under the ‘rules of intestacy.’ This means the rules will determine who is entitled to inherit and benefit from the estate. The rules are based on blood relations.
If you are married at the time of your death, and your estate is less than £270,000 everything passes to your spouse or civil partner. If your estate is worth more than £270,000 and you have children, the first £270,000 will pass to your spouse and the remainder will be split equally between your spouse and your children.
If you have no spouse, your estate will pass to your children. Your children would become entitled to their share of the estate at 18 which most people consider to be too young. By making a will, you can decide at what age you would want them to inherit.
If you do not have children or grandchildren, your estate will be shared between your parents in equal shares. If there are no surviving parents, ‘whole blood’ siblings will inherit and so on, moving down a list of relatives from ‘half-blood’ siblings to grandparents, aunts and uncles and if there is no surviving relatives to benefit the estate, everything is passed to the Crown.
Not only does this mean that your estate will be shared according to the intestacy rules, but it also means that the people responsible for administering your estate are nominated automatically, in a priority dictate by the rules. This may mean that the role of administering your estate may be left to someone who is not appropriate for the role and may be irresponsible or incapable of doing so. Having a will allows you to choose certain individuals you trust as executors or trustees.
A will can also limit the risk of any family disputes and arguments. The intestacy rules make no provisions for modern families and does not recognise stepchildren or cohabitees. This can lead to arguments and disputes amongst family members at an already stressful and upsetting time.
Having a will also allows you to appoint a guardian for your children under the age of 18. If you and your partner were to pass, it is important that you have a will which details who you would want to care for your children.. Additionally, having a will also allows you to leave inheritance to a child under the age of 18 which can be used to assist the guardians with the financial costs incurred in caring for your child.
Inheritance tax planning
In addition, having a valid will in place may mitigate your inheritance tax liability. As it stands, the standard Inheritance Tax rate is 40% and this is charged on the part of your estate that’s above the threshold of £325,000. Although there are certain reliefs and exemptions that you may qualify for, having a will can mitigate your tax liability. For example, leaving assets to your spouse or civil partner will be automatically exempt from inheritance tax and leaving property to your children and grandchildren can also reduce the inheritance tax due.
The importance of reviewing your will
After creating your will, we recommend reviewing your will every few years to ensure it remains up to date and reflects your wishes and especially when you go through big life changes or a significant change in assets. Both marriage and divorce have a significant effect on a will and when either life changes occur, you should consider updated or redoing your will. Equally, when there is a birth of a child, you should consider updating your will to appoint a trustworthy guardian for your children.