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Making a will is very important if you care what happens to your money and your belongings after you die, and most of us do. But have you tried to talk with your parents about their will? If that conversation isn’t happening, you’re not alone.
And it’s not only parents that are the only ones who are uncomfortable. Adult children may also be nervous about raising the topic of their parents’ finances for fear they appear greedy or nosy. Understandably talking about dying can be seen as ‘taboo’ and it is not always easy to bring it up. However, discussing your will with beneficiaries means they are better prepared when the time comes.
However, worryingly almost six and half million adults refuse to discuss their will with loved ones according to new research. A quarter of people with a will say they will not discuss it as they do not want to think about dying and one in four do not want to upset beneficiaries by discussing the contents of their will.
It is also hugely important for family members to be aware of vital decisions in your will, such as who will look after your children. By overcoming ‘death anxiety,’ the natural fear of talking about death and the emotions associated with it, these important conversations can ensure your beneficiaries are aware of your wishes and understand them.
Nearly half of UK parents, the research identified, with adult children believe their will is ‘no one’s business’ but their own or a partners. But sharing the contents of a will makes the financial and practical consequences of death easier for those left behind. Losing someone can have a huge impact on finances for months or even years to come, so it is crucial for families to be prepared.
Four reasons why you need a will...
Don’t delay
It’s easy to make a will – and it will save your family unnecessary distress at an already difficult time.
What happens if you don't leave a will?
If you don’t have a will when you die, your money, property and possessions will be shared out according to the law instead of your wishes. This can mean they pass to someone you hadn’t intended – or that someone you want to pass things on to ends up with nothing.When you die without leaving a will, the law decides who gets what and how much.
It doesn’t matter what your relationship with those people was like when you were alive.
By leaving a will that says clearly who should get your property and money when you die, you can prevent unnecessary distress at an already difficult time for your family or friends.
Some parents have had to sue their own children to get a share of their partner’s estate when their unmarried partner dies.
The law says that in this situation the children get everything.
What is a will trust?
A will trust is a trust created within a person's will and is a relationship between three parties:
However, when it comes to helping family through trusts in wills, the ‘testator’ (the person making the will) needs to consider the impact of family law and taxation.
How does divorce affect trusts?
The matrimonial courts, for example, have powers during divorce cases to make financial settlement orders based on a person’s wealth, not just in their own name but also assets put into trust for them. While the court cannot force trustees to make provision from the trust to the beneficiary to meet their financial settlement obligations on divorce, they can use ‘judicial encouragement’ when they have explored the nature of the trust and the history of distributions made.
Nuptial settlements are made primarily for the benefit of one family member and their spouse and issue. If the key beneficiary is the one getting divorced and they have been used to having all their requests for funds met by the trustees then it is highly likely the matrimonial court will take the trust fund into account when making their order for financial settlement on divorce.
It is therefore risky to separate an ‘estate’ (money, property and possessions) between siblings, leaving each a share in their own trust, rather than leave the whole estate in a single trust for the benefit of a wide range of beneficiaries, such as all the siblings, their spouses or civil partners and their issue. This sort of trust is unlikely to be regarded as a nuptial settlement and therefore would not be considered on any beneficiary’s divorce.
How does inheritance tax affect trusts?
While inheritance tax applies to an estate on death, it also applies going forward to trusts created under the will. The rule is that any trusts created by a will are deemed to start for inheritance tax on the date of death.
Where a settlor creates trusts on the same day they are known as ‘related settlements’
and this means they must be added together when calculating inheritance tax charges on each trust
in the future.
Should I create separate trusts for different members of my family?
If the family wish to have separate trusts for different branches of the family, and still wish to use the pilot trust system to achieve this, it should be considered that there is not a great deal of inheritance tax saving and there are also potential family law issues. The costs of administering numerous trusts and complying with complex regulations are also increased.
It therefore makes sense for many clients to have one discretionary trust in the will which benefits all siblings and their families. Inheritance tax will be charged on the total relevant property, so there is no tax saving, but there will be some family law protection and hopefully less administration costs.
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