My colleague Stephanie Walls has recently written a very interesting article about a dispute between two step-sisters over inheritance following the death of their parents. The unfortunate set of circumstances highlights how important it is to ensure that you have a valid Will in place – especially when you have a complex family arrangement – which clearly sets out your wishes.
So, why make a Will?
1. You dictate what happens to your assets and who they go to
Putting it simply, making a Will puts you in control. You are able to specify exactly how and to whom your assets pass on your death. This means that:
- in complex or blended families, a second spouse or partner or a family from an earlier marriage or relationship can be provided for;
- you can provide for your unmarried partner who otherwise would not inherit from your estate at all;
- you can leave gifts to your favourite charities, which may have a positive tax consequence on your estate;
- assets can be put in trust rather than left to beneficiaries outright. This is a particularly important tool for estate planning when considering asset protection and could be included in a Will to exercise control over assets that are being passed to children, to protect assets that are at risk in situations such as a divorce or bankruptcy or to protect an asset from being from used to pay for care home costs; and
- personal items such as jewellery and other possessions can be left to specified beneficiaries.
If you die without a valid Will, your assets will pass to your next of kin in a defined order, under what are known as the intestacy rules. These rules are rigid and do not take into account personal, individual or complex circumstances. This could mean that your children could inherit earlier than you wished and possibly at the expense of your spouse; unmarried partners do not inherit at all under these rules and someone you did not want to inherit at all could potentially benefit from your estate.
2. Choose the people you want to deal with your estate
Your executors will have a very important role in administering your estate and making sure that the terms of your Will are followed. Your executors may also be your trustees (if you have a trust in your Will) and will be responsible for those assets that pass into trust and the beneficiaries of the trust for many years after you have died.
If you die without a Will, then administrators will be appointed on a “first come, first served” basis from a list of potential people in order of priority, which may mean that an individual you do not trust or you don’t think is capable will be appointed to deal with your estate.
Guardians for your children
A Will allows you to nominate Guardians to look after and be responsible for your children should you die before they turn 18. In appointing Guardians, you are ensuring that you are choosing people that you trust to look after and raise your children.
3. Mitigate tax
A Will can be drafted to distribute your assets in such a way as to minimise a potential inheritance tax liability. This can include gifts to people who qualify for inheritance tax relief such as spouses, charitable gifting, or structuring gifts which qualify for reliefs (including agricultural and business property relief) to ensure that the tax relief is not wasted.
The Residence Nil Rate Band, which is currently worth up to a maximum of £300,000 (rising to £350,000 next year), is a very important allowance in mitigating inheritance tax. This can be easily lost if you Will is not drafted properly.
The judgment for the case mentioned in Stephanie’s article has been handed down, leaving one of the step sisters facing a legal bill of up to £150,000. The pain, acrimony and expense could have been avoided if valid Wills were in place.