Protecting you and your estate


Estate planning – Wills

 

Having a valid, up-to-date Will is essential. When you die, entitlement to your estate – your home and any other ‘real’ property; your savings and any financial interests you may have and your ‘chattels’, your personal possessions and belongings – has to pass to someone else. The purpose of your Will is to provide a list of instructions setting out how you want your estate to be distributed: it’ll say who your beneficiaries are and which parts of your estate you want them to receive. If you don’t have a Will, or it’s invalid, what happens to your estate and who decides? It means it may not be distributed in the way you want.

When you die, the future of your estate will be determined according to four broad scenarios.

  1. You have a Will, and it’s valid and it’s up to date
    If so, your estate will, probably, be distributed as you had wanted with the right people getting the right things. It’s important to make sure your Will is unambiguous and can withstand any legal challenges; increasingly, Wills are being contested by people who think, sometimes quite plausibly, that despite your wishes, they have a right to all or part of your estate.

  2. You have a Will, but it’s out of date
    If your Will doesn’t reflect your circumstances at the time of your death then you run the risk of your estate being distributed incorrectly. You may no longer have some of the things you have said you want a particular person to have; some of your beneficiaries may have died so can’t receive what you’ve left them and you may no longer want a particular person to benefit. You may also have left someone out, for example, since making your Will you may have new-born children or grandchildren. If your Will doesn’t reflect your circumstances it’s likely to be challenged.

  3. You don’t have a Will
    If you die without a Will, legally, you will be considered to have died ‘intestate’. In this case, your estate will be distributed according to the Rules of Intestacy, a set of standard principles which are very unlikely to reflect what you wanted. Over two-thirds of people in the UK die without a Will. If you have a young family, your children will be liable for any Inheritance Tax due on their share of your estate.

  4. You have a Will, but it’s not valid
    Only a third of those people who die in the UK have a Will, and nearly a third of these are found to be invalid. There are many reasons for Wills not being valid, typical examples being that someone has divorced or remarried, which automatically revokes their Will, or they may have amended their Will but done so after their signature. If your Will isn’t valid it may be challenged and your estate distributed in a way other than how you wanted.

What is a Will – and why is it important to have one?

A ‘Will’ or ‘testament’ is a legal document drawn up by a person, the ‘testator’, setting out how they would like their ‘estate’ to be distributed on their death. It names an ‘executor’, who will manage your estate during ‘probate’, the legal process of establishing the validity of your Will, and who will then see that it is distributed accordingly. It also, of course, names the people or organisations, the ‘beneficiaries’, who you want to receive all or part of your estate.

Having a Will is important, especially so if you have dependants or want to leave something specific to a particular person. Providing a plan of what you want to have happen has many advantages as it will:

  • make it easier for your family and friends to sort out your estate
  • help your executor manage probate and distribute your estate as you wanted
  • prevent your estate being shared according to the Rules of Intestacy
  • help reduce the amount of Inheritance Tax that may be payable
  • speed the process, reduce family arguments and legal challenges

Once you have a Will, it’s just as important to keep it up to date so that it reflects your circumstances. Unless there’s a significant change in your life which will cause you to review your Will, it should be reviewed every five years.

Types of Wills

There are many types of Will, the two most common being:

  • Will in solemn form
    This is used by an individual, someone who is not in a relationship.
  • Reciprocal Will
    Also frequently known as a ‘mirror’, ‘mutual’ or ‘husband and wife’ Will, these are Wills made by two parties, typically husband and wife or civil partners. It makes similar or identical provisions in favour of each other.

Getting it right

Although it’s relatively easy to make a Will, it’s just as important to make sure the content is set out in a way that ensures that your wishes as testator are fulfilled. Any person over the ‘age of majority’, the legally-defined age by which a person leaves childhood and reaches adulthood (18 in the UK), can make a Will providing they have ‘testamentary capacity’, ie: they are of sound mind.

To be valid, your Will must fulfil a number of specific requirements.

  • It must identify you as being the testator, the person making the Will.
  • You must say that you are ‘publishing’ your Will, so that it becomes legally recognised for what it is.
  • You must confirm that you are revoking all previous Wills and ‘codicils’ (modifications to past Wills).
  • You must confirm that you are in ‘sound mind’ and that you have the capacity to dispose of your estate and that you are doing so freely and willingly.
  • You must clearly identify any beneficiaries and what they are to receive.
  • You must sign and date the Will (usually) in the presence of at least two disinterested witnesses.

Although a Will is a legal document there’s no legal requirement for it to be drawn up by a lawyer and this makes it tempting to buy an inexpensive, pre-printed template and make your own Will on a DIY basis. Inevitably this will prove to be a false economy as a solicitor with an in-depth knowledge of estate planning will be able to make a difference in several areas.

  • You, the testator, will not be available when the Will is read to either clarify or explain what you meant so it’s important the Will is totally unambiguous and your intentions are absolutely clear – a solicitor will be able to ensure your Will is distributed in the way you wanted.
  • It’s also vital that your Will is durable, that it adequately covers future eventualities and can withstand any legal challenges. So, for instance, your solicitor may recommend you set up a trust to protect your assets and ensure they are preserved within your family, perhaps through generations.
  • A skilled solicitor will be able to ensure you maximise tax allowances and minimise the effect of inheritance tax.

Getting it wrong

To give a typical example of how things can go wrong.

Eric and Erica Smith have a son and a daughter, Paul and Pauline. The Smiths draw up reciprocal Wills specifying that, in the event of the death of one or other of them, their spouse will inherit everything, and that if they die at the same time then their combined estate, which is valued at £1million, will be divided equally between the two children. Unfortunately, Eric dies. As intended, his estate passes to Erica who still wishes their children, Paul and Pauline, to be sole beneficiaries in the event of her death.

However, Erica remarries and becomes Mrs Jones but, despite this automatically revoking her will, she doesn’t make a new one. Her second husband, Bill Jones, also has two children, Jack and Jill, and his Will in solemn form specifies that they are the sole beneficiaries of his estate.

Unfortunately, Erica passes away. With no Will she is deemed to have died ‘intestate’, the standard provision under the Rules of Intestacy granting the first £250,000 of her estate to her spouse and the residue (£750,000) to be equally divided between her spouse (£375,000) and her children (£375,000). It means that Bill Jones, her new husband, inherits a total of £625,000 from her estate and Paul and Pauline, her children, each receive £187,500.

Shortly after Erica’s death, Bill Jones also passes away and his Will distributes his entire estate to Jack and Jill, his children. His estate now includes the £625,000 he inherited from Erica, of which, Jack and Jill receive £312,500 each whereas Paul and Pauline, the true heirs to their parents’ estate, receive nothing – which was not what either Eric or Erica intended…
 

How can One Financial Solutions help you?

‘Hope for the best but plan for the worst’ is a common maxim – but many of us just ‘hope for the best’ and then don’t do any planning at all.

One Financial Solutions is here to help you. As a firm of independent financial advisers we can provide impartial advice to help you identify the potential risks you face and develop a strategy that provides protection from their consequences. We’ll recommend the best products from across the whole of the financial services market and help put in place the safeguards you need to protect both you and your dependants.

We can also provide a comprehensive estate planning service to complement the financial advice we give you. Helping you preserve everything you’ve worked so hard to achieve and ensure that it’s passed on to who you want is a natural extension of what we do.

So, if you’re looking for help with any aspect of protecting either yourself or your estate, please call us on 020 3714 9565 or ask us to call you by sending an email to admin@onefinancialsolutions.co.uk.