This is the third of three blog posts on the topic of Estate Management. I’m certainly no expert in this field but I’ve been very interested to learn more about it. My blogs have been inspired by the charismatic Julian Bright from Bright Insight Ltd, a firm of estate planners.
As before, my question for you is, can you afford not to read and take action?
Wills – make sure your voice is heard
A staggering 6 in 10 British adults don’t have wills, a fact that bewilders me. I’ll be exploring some of the possible consequences of not having a will, as well as why this statistic is so shockingly high. I’ll also cover the benefits of having a will and how to go about creating one.
When a person dies without leaving a valid will, all of their property (referred to as their estate) must be shared out according to certain rules. These are called the rules of intestacy.
As these rules are based on ancient laws, they differ depending on the country you live in. I love this online toolfrom gov.uk which outlines the basics.
Not to beat around the bush, if you don’t have a will the people who you wish to benefit, may not. And, everything could take a whole lot longer to sort.
If you’re married things are simpler, but not necessarily in the way you’d expect or like. Assuming you’re married and you die without a will, your spouse will only be entitled to the first £250K of your estate. If you have children, then the rest is split between them. This can quickly become complex if there are multiple offspring, siblings, half & step families etc.
However, if you’re not married, even if you’ve been together a long time, you may not get a penny. In fact, The Queen may ultimately be entitled to your estate before a non-married partner, under the laws of intestacy!
What’s included in your will?
There are a few things that are typically included in a will:
Assets and Beneficiaries – what you’ve got and how it will be divided up
Executors of the will – i.e. who looks after things once you’ve died
Consideration of inheritance tax and care requirements
Expression of wishes – mainly around funeral arrangements
Guardianship of minorsYou can specify who can look after your children in your will.
If children are <18 years and there is no will in place, the local authorities will ultimately decide who takes care of them. In extreme circumstances this could see them being placed in care until decisions are made.
Other will related considerations
A will alone cannot protect against MAD (marriage after death). Say, my will states that I leave everything to my husband and ultimately my children, and my husband’s will mirrors mine. If I die first, he may subsequently re-marry. A marriage automatically revokes any previous will. Ultimately, if he then dies without updating his will, then my assets may go to his new wife and her offspring, rather than my own.
In the case of care needs for the elderly and infirm, individuals will need to use their own cash and ultimately may be forced to sell their property to pay for it, over and above £23K. Once asset levels have dropped below £23K, then the care needs are provided by local authorities.
The use of trusts
In conjunction with wills, you can also use trusts to protect your assets. The main beneficiary of your will is the trust rather than individuals. The primary beneficiary of the trust would then be named e.g. my husband, as well as my second beneficiary e.g. my children. In this way they benefit from the use of my assets, but they never actually own them legally.
In this way the assets can ultimately get passed on down through generations as intended. It can protect against MAD, as above, as well as if my own children get divorced etc.
Trusts can also protect you against means testing for benefits, such as the care costs mentioned above, as well as in cases of bankruptcy.
Finally, trusts can also shield assets from inheritance tax. What’s more they can help to avoid generational inheritance tax. This is when the same inheritance ultimately gets taxed twice as the asset is passed down through generations. A £100K asset is taxed at £40K, with the £60K going to the 1stbeneficiary. When they die and this passes down, this may be subject to IHT in its own right.
How can I get a will sorted?
Age UK outlines a simple, structured approach to creating a will.
You could write your own either online or via a ‘kit’. This can be a cheap option, but won’t necessary be the most thorough or comprehensive. However, this may not become apparent until after your death.
A safer and more thorough approach will be to use an appropriate will writing service provider. They will prompt you to think about things that you’d probably not normally consider on your own.
These could include a legal professional e.g. a solicitor or lawyer, or a will writer or estate planners, such as Bright Insights Ltd. Ultimately, it’s important to find someone that you trust as you will need to be very open with them.
Common challenges, risks and solutions
If you think that life is complex, just wait until you die!
- Complexities of modern life – step-children, ex-wives etc. can really kick in
- Families sometimes disagree with the contents of the will.
- Family dynamics can change over time or when money is involved.
- Where there’s a will there’s a relative! It’s amazing who might turn up out of the blue!
Many people die intestate, there are an estimated 31 million that could die without a will – sometimes leading to interesting and unexpected consequences.
Those that have wills may end up writing multiple versions over time. Identifying which is the final valid will can be a challenge.
If only a copy is available, someone (who) may need to take this to court and swear on an affidavit. Even if straightforward, this could take up to 18 months and cost several thousands of pounds. In the meantime, no assets can be released.
In addition, there is no central log where wills are kept. What if you made one yourself and no-one knows about it. What if your solicitor retires or goes bankrupt?
The only sure way is to have a will in place. And to ensure that this is properly stored somewhere safe e.g. professionally managed by a solicitor or Estate Planner, and kept up to date.
Why do so few people have wills?
As mentioned before, 2/3 of UK adults have no will. This could be for a number of different reasons.
- Many people don’t want to think about death, as it freaks them out.
- Some consider it to be expensive, when ultimately it could save them and their loved ones a lot of money!
- Others don’t want to / don’t feel they can be open and honest about their private matters
- Some people still don’t like thinking or discussing money
- Others don’t think they’ve got enough assets to warrant a will.
- Many just never quite get around to it…
Often, creation a will is triggered by some kind of catalyst e.g. the death of a loved one, illness, marriage, divorce, children etc.
Do I have a will?
Yes, I do. However, my husband and I put them in place a while back. Whilst not much has changed, a few important things have. We are also older, wiser and have a few more assets & beneficiaries to consider.
We’re currently working with Bright Insights Ltd to create wills and trusts that work for us and our particular circumstances. These will consider various factors depending on how our lives (and the lives of our nearest and dearest) ultimately pan out. This is important as none of us have crystal balls, but ultimately want what’s best for everyone in the long-run.
We’ve chosen to go with a professional estate planner for the more personal touch. So far, this has been a surprisingly pleasant experience. Not something you’d normally associate with writing a will!
It also feels good to be putting things in place to ensure things will be dealt with as we’d like.
Everyone should have a valid will, regardless of age, relationship status or wealth. This is the only way to ensure that things pan out in the way you’d like. You can create one yourself, but working with a professional will save you time and effort and almost certainly pay for itself.
It’s never too early to start making arrangements for your will. But it could be too late if you leave it…
Thank you for reading! For more on Age Life Balance, browse the blog at www.agelifebalance.com to find out more.