There comes a point in many people’s lives when the combination of the assets they own and their responsibilities to family and others means that they feel that the time has come when they should certainly be making a Will, and perhaps also doing some tax planning to make sure that their wealth passes to their intended beneficiaries in a tax efficient, rather than a tax inefficient, manner.
There are, however, other individuals who may assume that they have not yet reached that stage in life, or perhaps that the issue does not really affect them, because they are not yet ‘rich enough’. So they do not turn their minds to estate planning and Will making. Experience shows that these suppositions can be wrong, and that an unexpected or early death can leave those left behind with unnecessary problems and even conflict, at a time that is already distressing enough.
The purpose of a Will, in a nutshell, is to make sure that the right people inherit the right assets, and the purpose of estate planning is to avoid paying unnecessary tax in accomplishing that end. Put like that, there are few people, even those who think a Will and estate planning are not (yet) for them, who would say that they do not want to achieve these objectives.
Perhaps the most obvious example is the young adult, now perhaps in the early stages of their professional life, who would tell you that they have nothing to leave but their student debt! A little thought will show that they may well be wrong in that. Perhaps they have just got onto the property ladder, in a shared purchase with their partner, with parents helping them out with the deposit, but the bank ‘owns’ so much of the house that it hardly feels like riches to them; and of course there is that large life insurance that their employer has taken out to benefit them, but that does not feel like an ‘asset’ either.
An untimely death, perhaps in an accident, could create a very unhappy financial and family mess to be sorted out. If the arrangements for the purchase of the house with the partner were not properly documented, and everyone had not agreed beforehand in a legally binding way what would happen to the house and to the deposit, it will generally be found that everyone had made different – and incompatible – assumptions. The life insurance may turn out to be very valuable, but who will benefit? Will it be the partner, the brother and sister, or the parents (possibly just augmenting their own inheritance tax problems)? Everyone involved may well have different ideas of what the person who has died ‘would have wanted’. In some circumstances a family may be able to agree a way around the problems, but sometimes that is just too difficult.
The truth is that if a young adult wants to be sure what will happen to their assets then they need proper documentation of any property sharing arrangements, and they need a Will. And much to their surprise they may even need some tax planning as well.
Turning now to a different part of the family tree, we sometimes see clients where the ‘middle’ generation recognises a need for tend to assume that the laws of intestacy will be adequate for their own parents who may be less well off, or perhaps they feel awkward about raising the question of whether their parents have Wills. Again, this could be an opportunity missed: one obvious tax-efficient move might be for the assets to pass direct to the grandchildren’s generation, holding them in a simple trust if need be. There are other possibilities depending on the facts.
We also see families where, perhaps as a result of a secondment abroad, the parentsin- law live in another country and are not domiciled in the UK. This can offer golden tax planning opportunities that should not be missed. They do, however, need to be taken during the life of the non domiciled grandparents: taxrelated sticking plaster cannot be applied afterwards.
Mixed domicile marriages and civil partnerships – where one person is domiciled in the UK and the other is domiciled abroad – can present particularly attractive estate planning opportunities, but they can also bring serious tax problems. Anyone in a mixed domicile marriage or civil partnership not only needs expert advice on Will-making (is a Will needed in more than one country?) but also on avoiding tax problems in lifetime and in the event of a death.