Wills And Estate Planning

This page will consider the following;

• Writing a Will
• Inheritance Tax & Trusts
• Lasting Power of Attorney
• Probate

Writing a Will

I offer a very cost-competitive Will writing service to provide you with the reassurance that your wishes will be carried out. 

A will is a legal document that sets out your wishes in relation to who owns your possessions after your death and who will care for your  young children. It’s essential that the document is legally effective and that the language is clear. I prefer to use succinct and plain English rather than technical “legalese” which is often confusing and unnecessary. In fact using clear simple language is one of my guiding principles in all of the legal work that I undertake. 

Your Will is a roadmap for how your family and friends will ultimately sort out your affairs.

A Will needs to be well written and carefully thought out. I will ensure that you understand the Will in all respects. 

A Will is a vital document if you have children or other family who depend on you financially. It is also essential if you wish to leave something specifically to somebody who is not a close family member.

It is important to make sure that what you own ends up where you want it to. Even a Will that is very simple will make it easier to deal with your Estate, saving time and money.

Do I need a Will?

It’s a really good idea for any adult to have a valid will, no matter how old they are. If you are relatively young, think of it as an insurance policy. Having a will that you are happy with will give you peace of mind, and this can prevent undignified family disputes after your passing. 

If you don’t have one, then the people that you want to benefit from your estate (such as an unmarried partner or a partner with whom you are in a civil partnership with) may get nothing in the unfortunate event of your untimely death. Hopefully the will will simple become a document that will be put into a drawer (or better still, a safe) and then forgotten about for a very long time. 

If you have no living relatives then not having a Will might mean that the Government will gratefully receive your estate, rather than a specific cause that is very important to you. A bequest to such an organisation can be important part of your personal legacy to the world. 

Tax Planning

Once very important aspect of preparing a will is to consider the ultimate impact of Inheritance Tax. It is extremely sensible to structure your will in such a way so that your Estate (and therefore your loved ones) will not ultimately to pay avoidable Inheritance tax. It just needs a little care and attention. Tax efficiency is a good thing!

Wills are often used to create Trusts as part of tax planning. This can provide a degree of flexibility for your bequests. 

Also, you could make tax-efficient provisions for loved ones with special needs.

Your funeral wishes can be included in a will. Whilst these wishes are not legally binding, they will carry a great deal of moral clarity which your family should not ignore. 

Young Children

Preparing a will focuses the mind, and it will cause you to consider difficult questions such as who will look after your young children should you die. You can appoint a Guardian to look after your children whilst they are under 18 years old. This is very important if there is no one else with parental responsibility over your children when you die. 

A couple should also, unfortunately, think about this just in case, for example, a car accident might one day tragically cause both parents to pass away at the same time. It’s not a nice thing to think about, but it is worth spending some time considering such an eventuality. 

Very young children can, of course, be named as beneficiaries under your Will. You can choose to specify the age you would like your children to reach before being able to access their inheritance. Inheritances at the ages of 18, 21 or 25 are common. This ensures that your child’s inheritance will be managed on their behalf by “Trustees” who you will appoint in the Will. 

Protection of Assets

It is worth emphasising that you may want to protect the inheritance of beneficiaries in either financial or relationship difficulties.

You should also consider your position if you yourself are going through a relationship breakdown, and you want to ensure that your wishes will take effect.

Your Gifts

Legacies can take many different forms including items of sentimental value, a fixed cash amount to a friend or favourite charity. You can then divide up the balance of your Estate between family and friends in whatever proportions you choose. 

Your Executors

It is important for you to decide who will sort out and administer your Estate. 

What happens if you die without a valid Will?

The legal term is that you will die “Intestate”. If you do then things may ultimately become more stressful, and potentially more time consuming, for your family.

Everything you own will be shared out in a standard way as prescribed by the Law. This may create a result that you would not have wanted. This method may work reasonably well for a traditional family. But the rules were written before modern families emerged. If your family and family history contains various divorces, second or third marriages, step-children and step-grandchildren, same-sex partners and adopted children…….well the bottom line is that you will definitely want to prepare a Will if you really do want to take care of your loved ones.

Can you create a Will yourself?

The simple answer is “yes you can”. If your financial affairs and wishes are very simple, then this is a real option for you. However, it may be a confusing and potentially stressful experience for you, and if you make a mistake it could one day end up being very problematic and expensive for your loved ones. 

If you do this, you will want to make absolutely certain that your DIY Will is legally valid and binding. Whilst this is not difficult, unfortunately people have in the past made such mistakes with ultimately some quite distressing results. 

Where should you keep your Will?

The original Will that I write with for you needs to be stored somewhere that your family knows about. I can happily arrange for the safe storage of your original Will should you wish.

COVID-19 safety

Being mindful of the Pandemic and your personal safety, we can have a full discussion remotely by phone and video conferencing. It is always a pleasure to meet clients in person, and we can arrange this in way that conforms with government guidelines and your own personal wishes.

I can prepare your Will and give you full instructions and how to get it witnessed. We can find a simple way whereby I can, if necessary, witness your signature on the Will in a socially distanced way ensuring the document is legally valid.

Free Review of your current Will

One thing is certain: life circumstances are constantly changing. So it goes without saying that a Will needs to be reviewed periodically. I recommend that you do this every 3 to 5 years and for this reason I am happy to offer you a free review of your existing will. 

I also recommend that you review your Will at any time when any significant life changes occur, such as:

• You get married, engaged or form a civil partnership (note that a marriage or civil partnership revokes both parties’ existing Wills unless they were made in contemplation of that specific event)
• You become divorced (or separated) or your partner or an important family member dies
• You become a parent (or a grandparent)
• Your children become adults, and marry (or divorce)
• Your finances change dramatically (you receive an inheritance or sell a family business)
• Your health deteriorates
• You move house (or move abroad)
• You retire.

Inheritance Tax & Trusts

Inheritance Tax (IHT) is the tax paid on the Estate (comprising the property, money and possessions) of someone who has died when the value is above the IHT thresholds. 

The current IHT threshold is £325,000 per person. It doubles to £650,000 for a married couple – as long as the first person to die leaves their entire estate to their partner. Anything over this limit is subject to a 40% tax bill (note that the rate may be reduced to 36% if 10% or more of the estate that is above the threshold is left to charity).

But thousands of people are paying too much IHT – don’t be one of them. With the right advice and careful planning you can leave more of what you have to your loved ones – not the taxman.

Proper IHT planning can make all the difference between having to sell the family home and keeping it in the family. It can also help your Executors navigate their way through Probate much more easily. 

Can my Inheritance Tax liability be reduced?

Yes, there are plenty of steps you can take to reduce IHT bills. Tax legislation is always changing, so you do need to take up-to-date advice. 

Acting early can give you more options. For example, making a gift to a beneficiary could potentially reduce or eliminate your IHT bill. If you survive for seven years the gifts will be fully free of IHT.

Is IHT payable on all of the deceased’s possessions above the thresholds?

No. For example bequests to a spouse or a charity are free of IHT.

Who will have to pay my Inheritance Tax bill?

Upon your death, your beneficiaries and executors will have to pay any Inheritance Tax bill. The payment is due within six months from the date of your death, otherwise interest will be charged. Once HM HM Revenue & Customs have been paid, your executors can apply for a Grant of Probate which allows them to legally access and distribute the rest of your assets.

Can I gift my house to my children to reduce Inheritance Tax?

This is a bit of a minefield since there are many factors to be considered. To avoid IHT liability completely, the gift must be made with no strings attached. 

If the gift has conditions, or you will continue to benefit from the home in some way (by continuing to live there for example), it is categorised as a “gift with reservation of benefit” and will therefore remain subject to IHT. 

There are complex rules to ensure that there is no benefit, and each set of circumstances has to be considered individually.

What is the residence nil rate band?

The residence nil rate band is £175,000 in 2020/21. This additional allowance will only apply if you want to pass your home to a direct descendant like a child or grandchild. This can potentially increase your allowance by a significant amount.

Do I benefit by giving a gift to charity?

Gifts left to charity are entirely free of IHT. If you leave at least 10% of your net estate to charity, you can reduce the overall IHT rate on the balance of your estate from 40% to 36%.

Are there any gifts I can give that will be automatically free from IHT?

Certain gifts are automatically exempt, depending on who the recipients are. 

Transfers between married couples or civil partners are exempt as are transfers to UK registered charities, and various national institutions such as The National Trust, museums and universities. 

Small gifts (up to the value of £250 in any one tax year) can be given away to as many people as you wish. 

Gifts of £3,000 are exempt each tax year, and this can be carried over to the following tax year if not used. 

An exempt gift can also be made as a wedding gift – £5,000 to a child, £2,500 to a grandchild or great grandchild and £1,000 to anyone else.

Trusts

A Trust can be an important part of effective IHT planning.

A Trust is a legal arrangement where you give assets (whether cash, property or investments) to someone else (a “trustee”), so they can look after them for the benefit of a third person (a “beneficiary”). A common example would be for you to put some of your savings aside in a Trust for your children. Assuming that certain conditions are met, these assets will no longer belong to you. As a result the value of these assets will not be included in your future Estate after you have died, so that their value normally will not be counted toward IHT liability.

A properly constituted Trust is a convenient way of keeping control and protecting assets for the beneficiaries. If the beneficiaries are young children, this mechanism ensures that the property, cash or investments can be properly managed.

You may also consider using a Trust if:

• the beneficiary is at risk from creditors
• the beneficiary is financially irresponsible or unable to manage money
• you are worried about the money passing to a son-in-law or daughter-in-law after a divorce and want to “ring fence” the property
• the recipient might lose access to state benefits if the money were to be given outright
• you just want to leave the decision making process to somebody you can trust
• you wish to take the value of property outside your Estate as long as you are willing to let go of having the benefit of that property.

The many different types of Trust

Trusts come in various different formats, and which one you might wish to use depends on your particular circumstances. They include:

• Discretionary Trusts
• Bare Trusts
• Interest in Possession Trusts
• Accumulation Trusts
• Settlor-Interested Trusts
• Disabled Person’s Trusts
• Non-Resident Trusts, and
• Mixed Trusts.

Lasting Power of Attorney

For some, sadly, there comes a time in life when they cannot  manage their financial affairs or personal welfare and make balanced decisions. This may be as a result of old age, an accident, dementia, a stroke or other serious illness. Whatever the reason for the incapacity  you may on day need someone (known as an “Attorney”) to act on your behalf. 

Creating an Attorney in advance ensures that if the worst were to happen, you can have peace of mind that your financial affairs as well as your personal welfare are in safe  and trustworthy hands.

A Lasting Power of Attorney (LPA) is a legal document that lets you appoint one or more relatives to help you make decisions, or to make decisions on your behalf. You are free to also appoint friends or professionals.

Having an LPA set up in advance of it being required does make a lot of sense. Otherwise your family may have to go through a slow, expensive and quite stressful process in applying to the Court of Protection.

There are two different types of LPA:

A ‘Property and Financial Affairs’ LPA

This LPA gives your Attorney the authority to make a wide range of decisions on your behalf, in relation to your property, savings, pensions or other financial affairs. This can include buying or selling a property, dealing with tax or pension issues, operating your bank account, paying your utility bills, claiming benefits on your behalf, or using your assets to pay for your care costs if that becomes necessary.

A ‘Health and Welfare’ LPA

This LPA allows your Attorney to make a narrower range of decisions on your behalf, that cover your healthcare and personal welfare. This can include decisions about where you live and the care you receive, dealing with your Doctor; consenting to, or refusing, medical treatment; dealing with life sustaining treatment, approving a ‘Do Not Resuscitate’ order and other matters where you are no longer able to make those decisions yourself. You make your wishes clear and set them out in the LPA.

Probate

The people named in your WIll as an executor may have to apply for Probate. This is a legal document which gives somebody the authority to share out the Estate of the deceased according to the instructions left in the Will.

As a Legal Consultant, I do not currently offer Probate services as this is a Reserved Activity under Section 12 of the Legal Services Act 2007 and can only be carried out by current practising Solicitors.