Making a Will: How to Protect Your Family and Financial Assets
It is my firm advice that everyone should make a Will, but if you don’t then it is important to be aware of the consequences of not having one. Without having one in place at the time of your death, or if your Will is no longer valid, the law dictates how your estate will be divided in accordance with the Intestacy Rules. These rules could potentially result in your loved ones not benefiting from your estate in the way in which you would have wanted.
Why make a Will?
Below are some key points of why you should make a one to help protect your family and assets.
- To avoid your assets being distributed in accordance with the Intestacy Rules which could mean, for instance, your spouse not inheriting all of your estate
- To ensure that those you wish to inherit your assets on your death get them
- To nominate executors of your choice to deal with the distribution of your estate
- To nominate your preferred guardians of your children
- To make small personal gifts
- To take advantage of tax saving strategies.
When to update your Will and things to remember
The general advice is to review it every 5 years, or if you’ve had a change in circumstances in the family particularly births, deaths, decisions to marry, divorce, form or dissolve UK civil partnerships.
On marriage or entering a civil partnership (or remarriage or a new civil partnership), your old Will is automatically revoked and has no effect, unless it has been made in contemplation of that marriage or civil partnership and contains a relevant statement to that effect. If you pass away without making a new Will your estate will pass to a list of your relatives specified by law under the Intestacy Rules.
On divorce, any gift in your old Will to your ex-spouse or civil partner is cancelled as is their appointment as Executor but the rest of it stands. This can create problems so normally it is better to make a new Will.
The pitfalls of making a DIY Will
Homemade or “DIY” Wills have become a popular option over the last few years. The appeal is understandable with costs starting from as little as £10 for a pack, and there are also many online companies offering to make your Will for you for a low fee. However, there are disadvantages that comes along with homemade Wills and below are just some to keep in mind before making the commitment.
1. Poor wording and mistakes – Without legal training, DIY Wills can be a minefield. If your wording is incorrect or unclear, you run the risk of your wishes not being fulfilled.
2. Witnesses – They are often incorrectly signed and witnessed, which leads to them ultimately being invalid. This is where the presence of a qualified professional is beneficial, as they ensure mishaps are avoided.
3. Complexities – If you own property abroad, you have foreign investments, or you own a business, you should seek assistance when you it comes to drafting your Will. You want to make sure everything goes to the right person, and complex scenarios aren’t easily catered for in the one-size-fits-all DIY option.
A Will is a legal document, and, as such, legal advice should be sought when you’re in the process of drawing one up. Whether your Will is simple or multi-faceted, the advice that a professional can give you is invaluable and can get you to think about things that may have been overlooked. Having in place a valid Will ensures your loved ones will be well looked after when the time comes. Contact Nicole for more information.
Providing for your pet when you die
The pandemic has also made many of us think about our own mortality. Understandably, people want to ensure that their pets are cared for after they die.
Here are some things you may wish to consider.
- Do you want any gift to apply to your current pet only or to any pet which you own when you die?
- Do you want your pet to be looked after by a particular person and would they be willing to take on the responsibility? This could include financial provision for the care of the pet by leaving that person an absolute gift. Should you appoint a substitute beneficiary in case a primary beneficiary is not willing to care for the animal or if they have died before you?
- If there is no one suitable or, as an alternative you could consider: –
- Leaving your pet to your executors setting out details of care in a letter of wishes. The advantage of a gift to executors is that there is no danger of the gift lapsing and the testator can leave it to the executors to exercise their judgement to find someone suitable.
- Make financial provision for your pet through the use of a trust which could give some flexibility (although the trust should be limited to a period of 21 years and there may be practical issues in relation to such trusts such as the associated costs of running a trust);
- If you would like your pet to be cared for by an animal welfare charity (e.g. The Dogs Trust), you could leave a gift to that charity requesting them to find your animal a home. It is sometimes possible to register your pet with a charity before you die and a gift to the charity could be used as a default option in case the gift to your primary beneficiary has lapsed.
- How much should you leave by way of gift? The popstar, Michael Jackson, left $2 million for the care of his chimp Bubbles and Karl Lagerfeld, the fashion designer, left his cat, Choupette, a significant share of his estate. You should consider the age and life expectancy of the animal (compare a dog with a parrot!), and bear in mind that costs such as medication and vet bills may increase as the animal gets older.
If your pet has insurance, this is something else to be factored in when considering the amount of the gift.
Make sure that financial provision is adequate. Otherwise, the beneficiary may be reluctant to accept the gift of your pet. The executors may also have limited power to adjust the level of financial provision in those circumstances unless the residuary beneficiaries are in agreement.
Consequently, you should review your Will from time to time to ensure that any change in circumstances has been considered. You could also index link the gift to provide for inflation.
Should the gift be conditional on the beneficiary looking after your pet?
Please contact Nicole or the team for more information on making a Will.
Dying without a Will
Rik Mayall, comedian and actor, did not have a valid Will in place when he died in June 2014. He died “intestate” meaning his £1.2 million estate could have paid inheritance tax which could have been avoided with the right Will in place. Under the intestacy rules law, a significant part of Rik’s estate, as a married parent who died without a Will, would go straight to his children, triggering a potential tax liability.
The intestacy rules (when you die without a valid will) are set by law and can be summarised as follows:-
- Married/civil partner with no children. If you die without a Will everything goes to the spouse or civil partner
- Married/civil partner with children, and you die without a Will assets up to £250,000 and personal possessions (not land) go to the spouse or civil partner. Assets above that limit are split 50/50 between the spouse and the children.
- Unmarried, living with someone, with or without children, if you die without a Will the cohabitee receives nothing. Where there are children and/or grandchildren, they get everything. Where there are no children, the deceased’s assets go to their siblings and parents.
Where there are no children or other dependants, no parents, grandparents, siblings, cousins, nephews, nieces or aunts and uncles (blood relatives not relatives by marriage), the whole estate goes to the Crown. To have share in the estate the cohabitant would have to make a formal claim under the Inheritance (Provision for Family and Dependants) Act unless all other potential beneficiaries were over 18 and agreed that some assets passed to the co-habitant.
What does all this means for inheritance tax
One of the key inheritance tax perks is that spouses/civil partners can bequeath any amount to each other tax free. However giving assets to children will trigger an inheritance tax bill if the gift exceeds the “nil rate band” or threshold of £325,000 per person plus an additional sum (currently £125,000 as long as the whole estate is not worth more than £2.2Million) in relation to homes passed to direct descendants. If everything passes to a spouse/civil partner, then on their death, the first spouse/partner’s tax free threshold can be added to their own – thus doubling what can pass before tax. Everything that passes down above the tax free allowances is taxed at 40% of that value.
Avoiding the intestacy rules, is not the only reason it is a good idea to make a Will. With a Will:-
- You leave clear instructions about how your estate is to be distributed.
- You choose your own executors – the people who manage the estate.
- You appoint guardians to look after your children if they are under 18, until they come of age. You can also make financial arrangements for their benefit.
- You can make specific gifts to friends or family. These can range from items of jewellery to sums of cash.
- If you have remarried, you can ensure any children from your first marriage get a share of your estate.
- You to make gifts to charities
- You may avoid family disputes.
And just in case you were wondering, making a Will does not bring forward the date of your death! Contact Donna for more information.
Leaving a legacy for your pet
Considering leaving a legacy for your pet?
Many will have heard the tale of Karl Lagerfeld’s cat Choupette, who reportedly inherited a substantial sum from the German fashion designer’s £153 million estate. Whilst many of us with pets may not have the resources to fund such a lavish legacy, have you thought about what will happen to yours should they survive you?
According to statistics from the PDSA, 49% of UK adults owned a pet in 2018. Being a dog owner myself, I know that pets are often considered an important part of the family. Their welfare, and the cost of caring for them, should be given thought when making or updating your Will.
Whilst owning a pet is a source of pleasure it’s also a financial burden. As an example, the average cost of dog food alone is approximately £200 to £400 a year according The Money Advice Service, with many of us spending significantly more than that on treats and accessories.
In England it’s not possible to leave a legacy directly to your pet. However, you can leave your pet to a friend or member of your family, together with a gift to provide for their maintenance. This doesn’t guarantee that they will be willing to accept the responsibility of looking after your pet, so you may wish to consider making the gift conditional on them doing so. And you should certainly ensure you make it conditional on your pet surviving you.
If the beneficiary is unable or unwilling to care for your pet, then a backup plan is a good idea. Many charities offer rehoming schemes, and my own dog is signed up with the Dogs Trust Canine Care Card scheme.