Guidance
Overview
Estate Planning and Tax Consideration
A Clause by Clause Breakdown of Your
Will
Signing and Witnessing Your Will
Aftercare - Revision and Safekeeping of
Your Will
Overview
Why do I need a Will? - A Last Will and
Testament is the only way that you can control what will happen to
your property after you die, and to make sure that your wishes are
respected. If you die intestate (without having made a Will) then
the law will determine how your property is distributed, which is
unlikely to be in line with your own wishes.
By making a Will you can ensure that people who you know and
trust are appointed to administer your estate and look after any
children, instead of being chosen by court officials. If your
property is worth a large amount of money you can arrange your
affairs and finances to minimise the amount of inheritance tax
which comes out of your estate that your beneficiaries will have to
pay. Your Will can also be used to express funeral preferences.
What is Intestacy? - When someone dies without
leaving a valid Will, they are said to have died intestate, and the
court will appoint 'administrators' who will take charge of the
estate. Although these administrators will usually be close family
members, they will have no control over how the estate is divided
up and are required by law to distribute the estate in accordance
with the 'rules of intestacy'.
People often think that if they die intestate everything will go
to their spouse or partner, but this is not the case. The rules are
quite complicated, but generally speaking everything up to a
certain legally defined limit will go to the spouse or civil
partner of the deceased, and everything over this amount will be
divided up between children, siblings and other more distant
relatives. This may mean that a spouse inherits far less than they
had expected.
The rules of intestacy only provide for an estate to be
inherited by spouses, civil partners and certain close blood
relatives. If there are none of these, then the whole estate
becomes the property of the crown. Unmarried couples can
never inherit under the rules of intestacy, no matter how long they
have been together.
Who can make a Will? - In England and Wales
everyone who is of legal age and sound mind can make a Will. This
means that:
- Minors (people aged under 18) cannot generally make a Will,
although special exceptions apply to certain minors such as those
serving in the armed forces;
- Anyone who has a history of mental illness, disorder, or
condition which may (or could be argued to) affect their judgement
should speak to a doctor before making a Will. It may be necessary
to ask your doctor to sign a declaration of capacity attached to
your Will in order to prevent it being challenged after your death.
In situations such as this, you should take appropriate legal
advice.
If you are married or you have a civil partnership then both you
and your spouse or partner should make a Will. Many married couples
and civil partners make "mirror Wills" which are identical in most
respects, and name the surviving spouse or partner as sole executor
and beneficiary.
If you are not married but you live with someone or have a
long-term partner that you wish to provide for after your death,
the only way you can do this is by making a valid Will. It is
important to remember that the rules of intestacy will not
allow unmarried partners to inherit.
How long does a Will remain in force? - Once a
Will has been signed and witnessed it will remain in force until
the executors have carried out your wishes after your death, unless
the Will is revoked. A Will can be revoked in one of the following
ways:
- By signing a deed of revocation, or by making a new Will which
specifically revokes any previous Wills;
- By destroying the Will deliberately and with the intention that
it should be revoked;
- By marrying or re-marrying, or by entering into a civil
partnership unless your Will specifically states that it is made in
contemplation of that marriage or civil partnership.
When should I prepare a new Will? - You should
review your Will regularly to make sure that it still meets your
needs. There are a number of reasons why you may need to amend or
re-write your Will:
- Marriage or Civil Partnership - Unless you
specify otherwise in your Will, it will be revoked by any
subsequent marriage or civil partnership which you enter into.
- Divorce or Dissolution of Civil Partnership -
Divorce or dissolution do not revoke a Will, but if your former
spouse or civil partner is named as a beneficiary, then he or she
will not be able to inherit under your Will unless it specifically
states otherwise, nor will he or she be allowed to act as an
executor.
It is important to note that separation has no effect on a Will,
and if you are separated from a spouse or civil partner then you
should review your Will.
- You have become a Parent - Starting a family
is a crucial time to write or amend your Will, so that you can
guarantee that your children have financial security if anything
were to happen to you. Also it is an opportunity to appoint
guardians to take care of your children in the event of your
death.
- Changes in the Law - From time to time the law
changes, and new legislation is most likely to affect your Will if
it relates to inheritance tax. In these cases it may be necessary
to take advice on whether your Will is still suitable, or whether
new measures are necessary to minimise the tax liability of your
estate.
- Changes in your Personal or Financial
Situation - Gaining new assets may mean that your estate
becomes large enough to attract inheritance tax, in which case you
should take advice about planning your estate to minimise tax
liability. Alternatively, if you sell or lose assets or give
someone an advance on their inheritance, your estate may no longer
be large enough to provide for all of the gifts you have left in
your Will. In these circumstances it is best to revise your Will to
avoid future disputes.
Estate Planning
and Tax Consideration
There are a number of taxes which may be charged on your estate
when you die, but the most important of these is Inheritance Tax
(IHT).
Currently the first £325,000 of your estate is tax free (the nil
rate band). However, when calculating the value of your estate for
tax purposes the law does not only take into account the value of
your assets at the time of your death, but also any non-exempt
gifts which you have made during the 7 years immediately preceding
your death.
If the total value of your estate is less than £325,000, then
you will not pay any tax. However, if your estate is worth more
than this, then the portion of your estate which is over this
threshold will be taxed at a rate of 40%.
Any property which passes to your spouse or civil partner is
exempt from tax. For example, if you have £1 million you can pay
£675,000 to your wife and give the other £325,000 to friends or
relatives without paying tax. If you leave all of your property to
your spouse or civil partner, then he or she will also be able to
make use of your nil rate band on their own death - this means that
the first £650,000 of their estate will be tax free.
Our standard Wills are not designed to be tax efficient, and if
you are concerned that you may have to pay Inheritance Tax we can
put you in touch with a specialist Financial Advisor or Estate
Planner who can help you to make arrangements for your finances in
a tax efficient way and reduce your tax liability.
A Clause
by Clause Breakdown of Your Will
Executors and Trustees - An Executor is a
person who you appoint in your Will to have responsibility for
managing your estate after your death. He or she will collect in
your assets, arrange for valuations of the estate, pay any
inheritance tax due, pay your funeral expenses and settle any
outstanding debts. Executors will obtain a Grant of Probate from
the court in order to dispose of your assets, sell any property
which needs to be sold, and distribute your estate in line with the
terms of your Will.
By law, you must appoint at least one executor in your Will,
although it is preferable to appoint two so that the
responsibilities can be shared, and so that your executors can hold
each other accountable for the way in which they discharge their
duties. It is recommended to appoint reserve executors in case the
original executors are unable to continue their duties.
The most important thing to consider when choosing your
Executors is whether they are reliable and trusted to respect your
wishes. You can appoint a beneficiary as an Executor, and it is
very common for people to appoint the main beneficiary as
executors, and whilst many people do this to make the
administration of the estate easier it is not recommended that you
appoint a solicitor or firm of solicitors as the sole executor as
they will have a limited understanding of your wishes and your
relationship with the beneficiaries of your Will.
Sometimes, money or property is not given to beneficiaries
outright. Instead, it is held or invested for their benefit. This
commonly happens when you leave substantial assets or property to a
person who is under 18. This money or property is paid to the
person who you appoint as Trustee, who will manage the money on
behalf of the beneficiaries until the time comes to pay it
according to the terms of your Will.
You can appoint anyone you like as Trustees, but our Wills
appoint the same people to act as both Executors and Trustees. This
is usual practice and makes the administration of your estate
easier.
Guardians - A Guardian is a person you appoint
in your Will to stand in your place as a parent. On your death,
your appointed Guardians will have parental responsibility for your
children who are under 18 years old, and will make decisions
regarding their care and wellbeing.
The powers of Guardians include making decisions about where
your children will live, who they will live with and where they
will go to school. It is important that you appoint people you
trust, and who share or respect your values because the parental
responsibility which guardians are endowed with extends to make
decisions about your children's religious and moral instruction.
The Guardians and Executors are often the same people as the
Executors and Trustees, but this is not necessary. If you chose
different Guardians and Executors then it is important to choose
people who can co-operate because whilst the Guardians make
decisions about how your children will be cared for, the Executors
and Trustees make decisions about how - or if - that care will be
funded.
People frequently appoint guardians on the understanding that
their children will live with the guardian, but this is not
necessary. The main role of a Guardian is to make decisions about
the care a child receives, not necessarily to provide that care
themselves. You should always discuss these issues with your
preferred Guardian(s) before you appoint them and make sure that
they are willing to assume these responsibilities.
If you fail to appoint a Guardian for your children, then
decisions about who will have parental responsibility after your
death will be made by the courts following negotiation between your
family and your local social services department.
It is always advisable that you seek legal advice in complex
family situations such as:
- You and the other parent are divorced or are in the process of
divorcing;
- You were not married to the other parent when your child was
born and have not obtained parental responsibility or you are not
named on the child's birth certificate;
- There is a court order in force or pending which relates to
parental responsibility for your child.
Beneficiaries - Beneficiaries are the people
who will inherit money or property under your Will. Any person can
be named as a beneficiary, and whilst there is very little
difficulty in leaving any kind of gift to an adult (that is over
18), other types of beneficiaries can be more complicated:
- Children - If you make a gift to your
children, but do not specify them by name then the gift will be
divided equally amongst all your children. This does not include
step-children, but does include children who have been adopted or
who have not yet been born, and also includes illegitimate
children, whether you are aware of their existence or not. You can
avoid this confusion by specifying your children by name, although
this does mean that any children who are not specifically named
will not inherit. All of our Wills specify gifts to children by
name and if you subsequently have more children you will need to
revise your Will.
- Minors - A minor is a person under 18 years
old. Minors cannot own substantial assets such as company shares or
interests in land, nor are they capable of receiving these gifts by
Will. If your Will provides assets to a beneficiary who is a minor
at the time of your death, these assets will be held on trust until
he reaches the age of 18.
Before a minor reaches the age of 18 your Trustees will have the
power to pay the interest or income from the property towards the
education or benefit of the minor. They may also sell the property
and advance money for the benefit of the minor, but only if there
is a good reason for doing so.
- Charities - You can leave money or property to
a charity, which will be exempt from inheritance tax. When giving
money to a charity it is important to specify an existing
registered charity, as a gift which is for a purpose rather than an
identifiable beneficiary may fail or could make the administration
of your estate more complicated.
For example, make a specific gift to 'The Red Cross' rather than
a gift 'for the purpose of improving medical facilities in third
world countries'.
- Political Parties - You can leave money to
political parties, but remember that these organisation do not have
charitable status and your gifts are not exempt from Inheritance
Tax.
Specific Gifts and Legacies - Your Will can
provide for specific sums of money or items of property to be given
to named beneficiaries. After any taxes, debts and expenses have
been paid, specific gifts will be distributed from your estate.
Anything which is left over and which you do not give as a specific
gift forms the remainder or 'residue' of your estate.
Specific gifts do not need to have any monetary value. Very
often they are items which have some special emotional
significance, for example, photographs and keepsakes. You might
have inherited a family heirloom yourself which you now wish to
pass on. You should make it clear who is to receive each gift, and
you should describe the gift in sufficient detail to enable it to
be identified. However, you should avoid being too specific with
money, for example a gift of '£1000 from my bank account no.123456'
will fail if the account does not contain enough money, even if
there is plenty of money in your other accounts.
Sometimes an item or piece of property is used as security for a
debt. For example, your house may still have a mortgage outstanding
on it. Charges of this type are termed 'encumbrances' and when you
make a gift of property which is subject to an encumbrance the
beneficiary will be liable to pay for this encumbrance unless you
specify otherwise, in which case the encumbrance will be paid from
the residue of the estate.
Gift of Personal Chattels - You can specify
someone to whom you would like to give your 'personal chattels' to,
such as gifts of clothing and household furniture. If the personal
chattels are not made as gifts, they will become part of the
residue of your estate and will be sold and divided equally amongst
your residuary beneficiaries.
For example, you may want to leave the residue of your estate to
your children, but for your spouse to have all your personal
possessions.
Providing for Pets - It is not possible for a
pet to be a Beneficiary of your Will, instead pets are treated as
items of personal property and can be given as gifts to a
beneficiary, either by themselves or together with a sum of money
to pay for their upkeep.
Our Wills contain a standard clause which allows a Trustee to
give your pets to an animal rehousing charity in the event that the
beneficiary declines or is unable to take the pet.
The Residuary Gift - Any money or property
which is left over after all debts, taxes, expenses and specific
gifts have been paid is called the residue of your estate. Your
Will must contain a residuary gift which deals with this portion of
your estate, or else the law will treat you as someone who has died
partially intestate and the residue will be distributed according
to the rules of intestacy. The way in which your individual Will
distributes your residuary estate will depend on the options which
you have chosen:
- Life Interest - You may wish to give someone
the income from your property, but to leave the property itself to
someone else. This is done by giving a beneficiary a life interest
in the property. Your Trustees will pay the income or interest from
the property to the person you specify and when that person dies
the property will be divided according to your instructions.
This is usually the case where you want to provide for your
spouse or partner whilst they are living, but you ultimately want
your children to inherit.
Life interests are complicated, and our Wills only allow you to
create a life interest in the whole of the residual estate. If you
want to create a life interest over a specific piece of property,
then you should take legal advice.
- Residual Gift to Specified Beneficiaries - You
may divide your estate amongst a number of named beneficiaries,
either in equal shares or in shares which you specify.
- Residual Gift to Children - This is
essentially the same as a residual gift to specified beneficiaries,
except that if any of the named children die, their share will be
divided equally amongst their own children (your
grandchildren).
- Replacement Residual Beneficiaries - If one of
your original beneficiaries dies before you, the gift cannot pass
to anyone else unless you have specifically allowed for this in
your Will. If you have not, then there will be a partial intestacy
and that portion of your estate will be distributed according to
the rules of intestacy. You should always specify a reserve
beneficiary to avoid this possibility.
If you have more than one residuary beneficiary, instead of
specifying a replacement you can make provision that if one dies,
their portion will be divided equally amongst the remaining
beneficiaries.
Funeral Wishes - If you have any specific
wishes for your funeral, you can outline these in your Will. For
example, you may specify a burial or cremation, request that a
service is conducted in a particular venue or place of worship and,
if being cremated, that your ashes are scattered in a particular
location.
Administrative Provisions - These provisions
give additional powers and protections to your Trustees and make
the administration of your estate easier. They are standard
provisions and provide the following:
- Your Trustees and Executors will not be liable for any loss
caused by simple errors of judgement regarding the best way to
invest your estate;
- If you specify a gift to a charity which fails because that
charity no longer exists, your executors and trustees may redirect
the gift to a suitable alternative charity;
- IF your Trustees hold property for a minor, they may use that
property to benefit the minor if it is reasonable in the
circumstances.
If you have any concerns about these provisions, or the affect
which they will have on the administration of your estate, you
should take legal advice.
Signing and
Witnessing Your Will
Remember, your Will is not valid until it has been properly
signed and witnessed. You should arrange to do this soon as
possible, but you should check your Will before you do so. If after
reading this manual you are concerned about any of the provisions
or their effect then you should seek legal advice. By signing this
Will you are agreeing to Claims Financial Ltd's terms and
conditions of service, including the disclaimer and terms of use
which are reproduced on the first page of this booklet.
You must sign your Will in the presence of 2 witnesses, and then
they must both sign and date the Will in your presence and in the
presence of each other. This means that:
- All 3 of you must be in the room together, and no signing
should commence prior to this;
- When one person is signing, the other two should be watching
him or her sign;
- None of you should leave the room until the Will has been
signed and witnessed.
When choosing your witnesses you should opt for reliable people
who can be easily traced, and you must bear in mind the following
restrictions:
- Beneficiaries & their Spouses - Neither a
beneficiary nor the spouse or civil partner of a beneficiary should
witness your Will. If a beneficiary or his spouse or civil partner
witnesses your Will this will not affect the validity of your Will,
but that beneficiary will NOT be able to inherit under the
Will
- Executors and Trustees - Your Executors or
Trustees, or their spouses or civil partners can act as witnesses
to your Will unless they are also beneficiaries, in which case they
will not be able to inherit under the Will if they witness it.
- Blind - Because of the legal requirement that
your witnesses must see you signing the Will, a blind person cannot
act as a witness.
- Minors and People who lack Mental Capacity -
Minors cannot witness the signing of a Will, and nor can people who
lack mental capacity. You should avoid using a witness who is very
old and infirm as their capacity to act as a witness could
subsequently be questioned, which may cause your Will to become
invalid.
Aftercare
- revision & safekeeping of your Will
Revising your Will - From time to time you
should review your Will to make sure that it still meets your
needs. If you want to make alterations to your Will you should seek
legal advice and then either:
- Make a new Will which revokes your previous Will and gives
effect to the required revisions.
- Make a codicil, which is a document which confirms the
existence of your Will, but alters its provisions.
NEVER attempt to revise or alter the provisions of your Will by
physically changing or editing your existing Will. This includes
adding or crossing out annotations, words or provisions. These
actions will render your Will invalid.
Storing your Will - After it has been signed
and witnessed, your Will should be stored in a safe place at home,
or given over for safe keeping to a bank, solicitor, or other
professional document storage company. You should make sure that
your family and close friends know where the Will is kept.
You should store your Will securely in a folder in loose-leaf
format. You should not staple, clip or attach any other document to
your Will.
It is advisable to make photo-copies of the Will in the event
that the original is accidently lost or destroyed, but you should
clearly mark this as a copy. You may choose to send a copy of your
Will to the Probate Registry to ensure that no unauthorised
attempts to administer your estate succeed.