What is a Will?
A Will is a legal document which a person makes to dispose of their assets on their death. In order to make a Will, a person must be 18 or above and have sufficient mental capacity and not be pressured into making the document in order for it to be valid. The document itself must (in most circumstances) be signed by the person making it and signed in the presence of two independent witnesses. It is advisable that the witness is not a beneficiary of the Will otherwise they may forfeit the gift contained in the Will to them.
Once a Will is made, it can be changed and updated provided the person has sufficient mental capacity. It is advisable to review and update Wills every 3-5 years as family and financial circumstances change over time as does the law!
What does the Will cover?
Wills cover assets in a person’s sole name. Joint assets usually pass to the surviving owner unless the ownership has been changed. The most common example of this is a jointly owned property but each of the owners wish to leave their own shares to someone other than their co-owner so they may own the property as “tenants in common”. There are some assets which will not be affected by the Will and these are usually pensions and life insurance policies as they are written into trust and disposed of separately. The advantage of this is that it will also not form part of the estate for inheritance tax purposes.
Do I need to make a Will? / Why make a Will?
Lots of people assume that they do not need to make a Will because they do not have anything to leave but more often than not, we are sadly worth more dead than we are alive. Things which you are using, for example your home with a mortgage, can suddenly become a liquid asset and if you have mortgage cover, the full value of the property is then available to be passed onto loved ones.
If you do not make a Will, your estate will be dealt with in accordance with a set of rules called Intestacy. Intestacy will only look at family members so intended beneficiaries may lose out. Many people presume that if there are married or are in a civil partnership that their spouse or civil partner will automatically inherit everything and this is not necessarily true. If there are children involved it will be the personal chattels and the first £250,000 plus half the balance of the estate. The children will also inherit at 18 which in most people’s opinion is too young.
Wills can also allow you to appoint legal guardians for children under 18, protect assets for your children if you have been married previously, be used to mitigate inheritance tax, leave assets to other beneficiaries such as friends, charities or other financial dependents.
What is inheritance tax?
Each person is allowed to give away a certain amount on death free of Inheritance tax. This is known as the Nil Rate Band. The Nil Rate Band is currently £325,000 and is applicable on death after the deduction of any gifts made by that person within 7 years of death (after applying any applicable lifetime exemptions). For a married couple, if they choose to leave their estates to each other on first death, they can transfer any unused percentage of their Nil Rate Band to be used against the estate of the survivor effectively allowing them £650,000 before Inheritance Tax is paid on the balance over the applicable Nil Rate Bands at 40%.
From 6th April 2017, there will be the introduction of a Residence Nil Rate Band. The Residence Nil Rate Band will be limited to one residential property and will be capped at the lesser of the maximum band allowed or the net value after deducting liabilities such as mortgages. The property must pass to a direct descendant (includes a step-child, adopted child or foster child of the deceased) and their lineal descendants. The Residence Nil Rate Band will be introduced as follows:
£100,000 in 2017-18
£125,000 in 2018-19
£150,000 in 2019-20
£175,000 in 2020-21
From 2021-22 the main residence nil rate band will increase in line with Consumer Prices Index.
For estates with a net value of more than £2 million, the additional main residence nil rate band will be reduced by £1 for every £2 over the £2 million. Again for a married couple, this will be a total of £350,000 by 2020 in addition to the £650,000.
Do I need a solicitor to make a Will?
There is currently no requirements for a particular person to make your Will and you can even make it yourself! However, it will be one of the most important documents you will ever make as it covers all the assets which you have worked hard for during your lifetime. If you choose to make a Will yourself and it is invalid, your estate will still be dealt with in accordance with the rule of Intestacy as described above. Will writing companies are not regulated and can sometimes charge a small amount for making your Will but encourage you to buy their probate services in advance which can be several thousand pounds up front. If that company should close down, you will have no recourse and sometime you will be able to trace your Will.
By using a solicitor, you will have a regulated person dealing with your Will and if that firm should close, the Law Society will be able to track down who has your Will. Solicitors will also only charge for the work which they have done so you will not be paying for the estate administration or probate in advance. In addition, solicitors will have insurance in the event that a Will has been drafted incorrectly and beneficiaries should suffer loss as a result.
When choosing a solicitor, you should choose one with at least 2 of the following and preferably all 3:
- a specialist in Wills and Probate;
- a STEP qualified solicitor – The Society of Trust and Estate Practitioners is the worldwide professional association and an additional qualification for practitioners dealing with family inheritance and succession planning (the Society helps to improve public understanding of the issues families face in this area and promotes education and high professional standards among its members);
- a fully accredited member of SFE – Solicitors For the Elderly is an independent, national organisation of lawyers, who provide specialist legal advice for older and vulnerable people, their families and carers and essential for those who have boarder line mental capacity.
Please note that the above information relates to the law of succession in England and Wales and is correct at the date of posting.
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