Recently I attended a seminar held by a local will writer, a training event to highlight the need for tax planning and making sure your affairs are in order before we shuffle off this mortal coil.
What is a will?
It’s a written legal document which specifies where and to whom you wish your property and possessions (known as your estate) to be distributed in the event of your death. For a will to be valid it must be in writing, signed by the person making the will and witnessed by two people. Remember though, neither the witness nor their spouses can be a named beneficiary of the will. Although it doesn’t need to be dated, it’s good practice. The person making the will must be over 18, doing it off their own free will and in sound mind.
In my experience, people often delay organising a will because they feel it’s going to be either too complex or too expensive. Although I wouldn’t necessarily recommend writing you own will, there are resources on the internet and having even the most basic will is better than not having one at all. Better still, get additional peace of mind by using a professional will writer or solicitor.
Half the UK population don’t have a Will. Dying without one is called Intestate and presents several problems for the people you’ve left behind. Firstly, who should administer the estate? A will would have details of executor, the person in charge of distributing the assets. Dying intestate means a friend or a family member has to take on that role and apply for the grant of probate. Instead of the estate being distributed as per the wishes of the deceased, the rules of intestate come into force. If you’re married your spouse would get the first £250,000 and all your possessions and 50% of whatever is over, the remainder split between your children.
Besides the financial implications, dying Intestate also puts an enormous amount of emotional strain on your nearest and dearest at the worst possible time https://www.gov.uk/inherits-someone-dies-without-will.
Lasting Power of Attorney
I know first-hand what the impact is of a loved one being diagnosed with an illness which prevents them from managing their affairs. About 4 years ago my father was diagnosed with Dementia and went downhill very quickly. He was no longer able to manage his own financial affairs and the concept of money confused him. It was a small mercy; he had a lasting power of attorney in place, which meant my sister could begin to manage his affairs. A lasting power attorney allows you to decide who should make decisions on your behalf when you become unable to. It covers both your financial situation and health and care needs.
I regularly discuss LPAs with my clients, often they feel it’s something to put in place when they get “older”, it’s not! You can lose capacity at any time; we’ve all heard stories about someone who has suffered from a stroke at a relatively young age and have been unable to make their own decisions. Most people think their spouse can automatically make decisions on their behalf, but that’s not true. Without a power of attorney in place, an application to the court would need to be made which can be stressful, take a significant amount of time and expensive
Since October 2007 has been possible to transfer any unused inheritance nil-rate band to your spouse. Prior to that Will, trusts were far more popular, allowing the use of both nil-rate bands while the surviving spouse retained use of the assets. Although this is no longer necessary there are still occasions when the use of a will trust still makes sense.
What is a Will Trust
A will trust comes into effect on the death of an individual, granting the named trustees’ control of assets on behalf of others (beneficiaries), rather than property or assets passing to them directly. So what are the benefits of using a will trust? They can be really useful if you have children from a previous marriage and want to allow your spouse use of property or assets during their lifetime while ensuring they eventually pass to your children from the first marriage. It can also be a way of protecting assets from divorce proceedings, however, this is largely secondary as very few widows remarry and subsequently get divorced.
The benefits of a will trust have to be carefully weighed up against potential drawbacks. The tax treatment of a will trust is complex, the assets may be subject to capital gains tax, income tax and something called a 10-year periodic charge. It is crucial that you seek specialist advice when considering using any trust, to ensure you fully understand the implications and responsibilities involved.
If in doubt speak to a professional. In the words of the famous firefighter, Red Adair, “if you think hiring a professional is expensive, wait until you hire an amateur. If you would like more information on wills, trusts or other estate planning, please schedule a call using the link below.
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