Although you are not legally obliged to make a will, there are many reasons why it is preferable to have one and to make clear how you wish your assets to be dealt with on your death. This will involve not only specifying who should inherit what, but also ensuring that bequests are left on appropriate terms. For example, most parents wish to benefit their children but would not wish them to come into large sums at the age of eighteen. In such cases they might, in making their wills, provide that the children should not inherit until the age of twenty-five whilst at the same time ensuring that funds can be made available for the children if the need arises.
In your will, you can identify the people who are to act as your executors and who, as such, will be responsible for winding up your estate and giving effect to the directions set out in your will, and at the same time ensure that they are given the necessary powers to carry out these tasks effectively. You may also appoint guardians for your minor children.
A properly drafted will should give you peace of mind that your estate will be dealt with in the best interests of your family in the event of your death. If you do not make a will, your assets will pass under the rules of intestacy. Under these rules, if you die and are survived by your spouse and children, your spouse will receive all your personal chattels, a legacy of £125,000 and a life interest in half the residue of your estate. The remaining half of residue passes to your children at the age of eighteen. The rules of intestacy are rigid and designed to deal with the average estate, but they are unlikely to be appropriate for your own individual circumstances.
If you have made a will before, you have already addressed these issues. However, if your will was made more than five years ago or if your family circumstances have changed, you should review your existing will to ensure that it is still appropriate.
The first step in making a new will, or reviewing an existing will, is to draw up a list of your own assets and those of your spouse. This will assist not only in deciding who should inherit what but also ensuring that assets are passed on in as tax efficient manner as possible.
The basic structure of Inheritance Tax can be summarised as follows:
- A person's taxable estate is taxed at 40%, subject to a number of reliefs and exemptions
- The first £231,000 comprised in the estate is exempt from Inheritance Tax (strictly speaking, it is taxed at 0%): this assumes that this "nil rate band" has not been used up by gifts made in the last seven years. In drawing up a will, it is important to make full use of this exempt allowance wherever possible, as it represents up to £92,400 of tax saved
- Assets passing between spouses are normally exempt from tax
- Relief is available for holdings of business and agricultural property and also for gifts to charity
Tax advice will often significantly affect the drafting of a will. For example you may wish to benefit your children on your death; rather than leaving cash or assets to them direct (which could involve Inheritance Tax being paid) it might be preferable, having used your tax free band of £231,000, to pass assets to your spouse (in which case no Inheritance Tax is payable) and for him or her then to pass assets down to the children by way of lifetime gifts which will not be liable to Inheritance Tax provided that he or she survives for seven years after making the gifts.
If you would like us to prepare a will for you or to review your existing will, please print off and complete the will questionnaire below and return it to the person with whom you usually deal at Macfarlanes or contact us. We shall then arrange a meeting so that we are clear as to your wishes and can talk through the practical and fiscal implications of putting these into effect.
This note provides a general outline of this subject. Each case requires specialist advice depending upon its own particular circumstances and no responsibility can be accepted for the application of the principles contained in this note unless we have given such advice.
If you would like any further information or specific advice, please contact Michael Hayes, Matthew Pintus or John Conder.
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Will Questionnaire
Will Instructions
Print off the form below, fill in the details and return it to the person you usually deal with at Macfarlanes or fax to +44 20 7831 9607
You should consider the position of both yourself and your spouse
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Have you made a will? If so, please state who holds it for safe-keeping. Please supply a copy if this is available.
Please state your full name and date of birth and (if applicable) the full names of your spouse and children and their dates of birth.
Please state the names and addresses of the persons you would like to act as your Executors. It is usual to appoint two or more. These might be a member of your family or a trusted friend together with a professional person.
If you have children under 18, please state the name and address of the person you would like to act as their guardian. Normally, a guardian would not assume parental authority until after the death of both parents.
Do you have any items of personal property eg jewellery, items of furniture etc which you would wish to go to particular friends or members of your family?
Do you wish to give any money legacies eg cash sums to members of your family or friends?
Do you wish to make any gifts to charity?
To whom do you wish to leave your residuary estate (that part of your estate which is left over after all debts and legacies have been paid)? If you wish to leave the residue to more than one person, you will need to decide how much each one is to receive. If any potential beneficiaries are not yet 18, you will also need to decide the age at which they should receive their shares.
If none of the people named as residuary beneficiaries survive you, to whom would you wish your estate to go? It might be a charity.
Do you have any particular wishes about burial or cremation? If you do have strong views, then you should leave a written note at your home as well as making the point in your will.
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