Top 10 reasons as to why you should get a will...

What is a will?

A will is a legal document you create that sets out instructions for who will inherit your estate and what should happen after you die. It includes what sort of funeral you would like, how you would like your possessions to be distributed, as well as other wishes, like who should bring up your children, if you have them. Sometimes known as your last will and testament, it's a legally-binding document - but if you don't prepare it properly, it may not be valid. You are free to write your will yourself, but if you have a complicated estate, or simply want help, you can enlist the support of a solicitor or expert will-writer. As many as 60% of people don't have wills, by some estimates. If you die without one, your estate will be distributed according to strict rules, meaning the people you care about may lose out.

Your will tells everyone what should happen to your assets after you die (all these things together are called your ‘estate’). If you don’t leave a will, the law decides how your estate is passed on – and this might not be in line with your wishes.

Four reasons why you need a will...

1. A will makes it much easier for your family or friends to sort everything out when you die – without a will the process can be more time consuming and stressful.
2. If you don’t write a will, everything you own will be shared out in a standard way defined by the law – which isn’t always the way you might want.
3. A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind.
4. Writing a will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.
   
   

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.

Create a master directory for your loved ones, covering everything from bills to bank accounts. (These documents can also come in handy if you’re the main financial decision-maker in your household and your spouse doesn’t pay too much attention.)

2. A Master Directory

More than half of British adults have not made a will.  Of those who have, many have not updated their wills for some time, which is reflected in the soaring number of inheritance disputes heard in the High Court. Dying intestate — the legal term for not leaving a will — can leave considerable costs and complications for people left behind to deal with, alongside the heartache of grieving.

Despite this, research estimates that over 30m people in the UK have still not got around to formalising their intentions. It is so important for people to seek appropriate advice and review their wills on a regular basis — particularly on the occasion of any major life event.

To help you write your will, so that your estate passes to the people you intend, here are 7 things to consider:

1 Getting married affects your will

The thought of what happens when you die is unlikely to be the first thing to spring to mind when you walk down the aisle, but it is important to remember that all previous wills are revoked from the day you say “I do”. Unless you make a will following your marriage, the rules of intestacy apply.

2 Review your will if you get divorced

It is always a good idea to review your will at key stages in your life. But contrary to popular belief, when you divorce, your existing will remains valid. For inheritance purposes, your decree absolute has the effect of removing your former spouse from the will completely, although named executors and other beneficiaries will remain valid. Be aware that this rule only applies to legally divorced couples.

3 A common law partner will not automatically benefit when you die

There is a growing shift towards couples choosing to live together and have a family. However, no provision is made in the intestacy rules for unmarried partners. There is also no such thing as a “common law” spouse in England and Wales — a partner is not deemed to be a “spouse” for intestacy purposes unless a couple are legally married or in a civil partnership. Similarly, no provision is made for stepchildren on intestacy, unless they are formally adopted. You need to make a will if you want your cohabiting partner or stepchildren to benefit from your estate. You can also think about owning assets — property or bank accounts — jointly, so that the survivor inherits that asset automatically.

4 Check your will has been drawn up correctly

The requirements for what makes a will valid varies from country to country. In England and Wales, a Post-it note with your wishes written on it can be sufficient to count as a will, provided it is executed correctly. The formal requirements for making a will are that it must be in writing, signed by a testator — or signed by someone else at the testator’s direction — in the presence of two witnesses, who also sign the will. A valid will could be written on the back of a dirty napkin provided that it was signed by the testator and witnessed correctly. The signature still has to be handwritten, however. Many companies are now offering to produce wills online, but for a will to be valid, it still needs to be printed and signed by hand.

5 Your mental capacity will affect your ability to make a legitimate will

This is becoming more of a common issue due to the ageing population — another good reason to make a will, and set up a Lasting Power of Attorney (LPA). It is possible to make an application to the Court of Protection — which has jurisdiction over a person’s affairs once they have lost mental capacity — to authorise a “statutory will” for an incapacitated person. The court is usually willing to authorise this in circumstances where the individual has either never made a will or their circumstances have significantly changed — for example, family members who benefit under a pre-existing have died or assets have significantly changed. The court is also able to authorise lifetime gifts from the incapacitated person’s estate.

6 Your will can be challenged when you die

There are rules which determine which family members receive a share of your estate if you do not make a will, but there are no rules. In theory, you could give all your estate to one person or to a charity and not to your spouse, other family members or dependants. However, in England and Wales there is a statute that allows certain people to claim financial provision from an estate where they have been left nothing or too little. If someone feels they did not receive reasonable financial provision from the deceased’s estate, they may be able to bring a claim to benefit from the estate under the Inheritance (provision for family and dependants) Act 1975. A claim can be brought by a wide variety of people including a spouse, former spouse, people living with you, children including adult children or someone who was maintained by the person who has died. Be aware that claims brought by anyone other than a spouse will need to demonstrate financial need.

7 Donating to charity via your will can reduce your tax bill

People often leave charitable gifts in their wills, but it is not widely known that this reduces the amount of inheritance tax that will need to be paid on their estate. Those giving away 10 per cent of their net estate will reduce the rate of inheritance tax they would have to pay on the remainder of the estate from 40 per cent to 36 per cent.

The rules are intended to be fair, but they may not suit you. For example, if your spouse or civil partner and children survive you, your assets will be divided among them in fixed proportions that may not suit your family. Equally, the rules make no provision for a partner if you are not married or in a civil partnership, even if you have lived together for many years. It is possible to write your own Will, but it is a good idea to seek professional advice.

Your Will is important , and professional advice will ensure that your Will complies with all the legal requirements. A professional service also ensures that your instructions are clear and will be followed after your death, and that you have taken advantage of any tax reliefs available to you.

A Protective Property Trust (PPT) can be established which will help to protect your estate from being taken to pay for care home fees.

The Property Trust can only be created whilst both partners remain alive . Normally with couples the property is divided 50/50, though these percentages can be different. Upon the first death, their share of the property is placed into the Trust to be administered by the Trustees.

The Will also specifies who is to be the ultimate beneficiary of this share in the property and this would normally be the surviving children of the deceased. The surviving partner, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second partner the Trust comes to an end and the property passes absolutely to the beneficiaries. The surviving partner does not own the deceased's share of the property.

If the surviving partner chooses to sell and move to another property the proceeds from the sale can be used to purchase the second property and the terms of the Trust remain over the second property. If there is any excess capital following a sale then the money is invested and the surviving partner can take the interest that is generated as an income.

The deceased's share in the property is fully protected for the beneficiaries, so even if the surviving partner remarries, the children's inheritance is protected. This last point can be of particular interest to couples who have come together and have children from different partners. A PPT can help each person in a relationship ensure that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life.