It’s natural to put off making a will as having to think about what’s going to happen in the event of your death is not a particularly pleasant subject. However, drawing up a will is the best way to ensure that your loved ones are looked after properly and your estate is dealt with according to your wishes.
You may also keep postponing this task because it seems complicated and overwhelming. At Trinity Finance, we’re here to help make your will preparation as easy as possible for you. Our protection consultants are specially qualified to help you draft a will and ensure it is registered as a legal document. In this guide, we’ll explain what a will is and the importance of having one, what your estate includes, how to make a will, when it should be updated, how to reduce your inheritance tax liability and more.
What is a will?
A will is a document that gives clear instructions as to what should happen with your estate in the event of your death. Not only does it include your home and possessions but can also extend to what happens to your children, your pets and your business as well as how you would like your funeral to be conducted and who you’ve appointed to carry out your wishes.
What does your estate include?
Your estate includes all of your possessions and assets, including those that are solely in your name as well as those in joint names. These can include your property, your car, cash, investments, your pension fund, insurance funds, personal items (such as jewellery) and digital assets, such as a website, a PayPal account and purchases made via iTunes.
The importance of having a will
Without a valid will in place, your estate will be divided according to the rules of intestacy, which means you have no control over what happens to it. In this case, the rules state that only married or civil partners and close relatives can be beneficiaries of your estate. This means that your partner won’t be entitled to inherit anything – no matter how long you’ve lived together or whether you have children – if you’re not in a civil partnership or married. The other intestacy rules state that:
- If you have a partner (married or civil) and no children, your partner will inherit your entire estate and your personal possessions.
- If you have a partner (married or civil) and children, your partner will inherit a minimum of £250,000 of your estate plus your personal possessions. They will also inherit half of the rest of your estate and your children will inherit the other half.
- If your partner is deceased and you have children, your children will inherit equal divisions of everything.
- If you have neither a partner nor children, your estate may be inherited by parents, siblings, nephews and nieces.
Not only do the rules of intestacy mean your estate may not be divided as you wish but it will take longer for your estate to be dealt with and for your beneficiaries to receive their inheritance. It’s important, therefore, to have a will if you have dependants, own a property, have savings and investments, own a business or have insurance policies in place. That way, you can be sure that family members are looked after and your assets will be left to beneficiaries of your choosing. Having a will in place also helps to reduce your inheritance tax liability, which we’ll explain in more detail below. Some other factors to be aware of if you don’t have a will – or have opted for a mirror will or a low-cost will – are:
- The assets left to your children will increase their inheritance tax liability.
- The assets left to your children may be forfeited if they get divorced or go bankrupt.
- If your partner remarries after you have died, they can gain possession of your estate, potentially leaving your children without an inheritance. This issue can escalate should they then divorce and your estate becomes divided in the settlement.
- The value of your home can be assessed by the government, culminating in its potential sale and the proceeds then being used to pay for the long-term care of an elderly partner.
At Trinity Finance, our mortgage and protection consultants – located throughout Kent, London and Edinburgh – are available to discuss your concerns about making a will before helping you to prepare one. Simply give us a call on 01322 907 000 for peace of mind and to start the process of protecting your loved ones when you’re no longer here. If it’s out of office hours, send an email to us at email@example.com or an enquiry via our contact form. One of our financial advisers will reply to you as quickly as possible with more information.
Reduce your inheritance tax liability
As briefly noted above, another reason to have a will in place is to help mitigate inheritance tax. This is payable based on the value of your estate and who you leave your estate to. Inheritance tax will become payable if your estate is over £325,000 in value and the standard rate charged is 40%. This is only charged on the amount above £325,000 so, for example, if your entire estate is worth £450,000, the first £325,000 is tax-free but 40% inheritance tax will be charged on the remaining £125,000. There are ways to reduce the inheritance tax bill that becomes payable, however. With the right planning, you can ensure that more tax isn’t paid than is necessary.
Share your wealth early
Consider sharing some of your wealth with those you love before you pass away. Is your child or grandchild going to university and could do with help paying the fees? Are they hoping to buy their first home but haven’t been able to save an adequate deposit? Your parent may be living in a care home and you can help them with some of the costs. Whatever your loved ones may need, you can give a total of £3,000 away each tax year without this sum being included in your estate’s value. If you don’t give away the entire £3,000 in one tax year, you can carry the unused amount forward to the next year.
Donate to a charity
Another option is to consider leaving a gift to a charity in your will. Not only does the charity benefit from your gift but the taxable portion of your estate is reduced. You can reduce the inheritance tax rate of 40% to 36% if you choose to leave a minimum of 10% to a charity from your net estate.
Leave your home to your children or grandchildren
The tax-free threshold can be increased from £325,000 to £500,000 when you leave your home to your children or grandchildren. The term ‘children’ in this case includes stepchildren, adopted children, foster children or those under your guardianship. Great-grandchildren are also included in this situation.
Leave everything above the threshold to your spouse
Inheritance tax isn’t charged on any money or other assets you leave to your spouse. Therefore, if you leave everything to your spouse that’s above the £325,000 threshold, no inheritance tax will be payable.
Our financial experts can guide you
These are just some of the ways that you can reduce your inheritance tax liability and there are many other aspects of inheritance tax to consider. Our financial experts are available to guide you through this somewhat complicated subject, making it more straightforward and easier to understand. They can provide essential inheritance tax planning advice to help you maximise what you leave to your beneficiaries.
How do you make a will?
The first step to making your will is to place a value on your estate. Make a list of all the assets you own, such as your home, other properties, savings, pension funds, investments, vehicles, personal belongings and insurance policies. The next step is to decide who you want the beneficiaries to be and how you want them to benefit from your will, such as with specific items or money. You also need to think about what should happen if a beneficiary dies before you do.
Make sure you leave instructions in your will as to who is to look after your children if they are under 18. Another consideration, as we mentioned earlier, is whether you wish to leave a gift to charity. If you have a specific charity in mind, be sure to include the correct details in your will so that your gift goes to the right one.
Appoint your executors
You need to stipulate who you want to handle your estate and carry out your wishes. Having two executors is advisable in case one of them is unable to fulfil their role at the time. You can have up to four executors if you prefer. Executors tend to be family members or friends but you can choose a solicitor, bank or other professional body for this role, although you’ll pay a fee in this case.
Write your will
If your estate and wishes are straightforward, you can write the will yourself. If you decide to do this, ask your solicitor to check it afterwards to ensure there are no mistakes in it. This is important because any mistakes will have to be dealt with by your executors and legal costs may be involved, reducing the value of your estate. You even risk your will being invalidated if there are mistakes so it’s vital to ensure that it’s correct.
To make things easier for you and to ensure your will is written correctly, our protection consultants are available to prepare a will on your behalf. Our professional team is here to help make the process as easy as possible for you regardless of how complex your situation may be. You may, for example, have a business to take into account, property located overseas, a dependant who requires special care or be concerned about family members making a claim on your will. Just give us a call on 01322 907 000 to discuss your circumstances and our financial specialists will ensure your concerns are correctly addressed.
What to do after you’ve made a will
When your will has been written, you need to sign it in front of at least two independent witnesses, meaning they’re not beneficiaries of your will. Once your will has been validated in this way, keep it somewhere safe at home or lodge it with your solicitor, your bank, the government’s Probate Service (for England and Wales) or a company that provides a storage service for wills.
Keep it up to date
It’s important to keep your will updated. Small changes to your will can be made by adding a codicil, which is an official supplement that needs to be signed and witnessed, just like your original will. For a significant amendment, however, you should cancel your original will and make a new one. It’s best to review your will every 5 years to ensure it’s kept up to date.
When should you update your will?
Circumstances change and there are times when it’s imperative to draw up a new will. These can include:
- If you have children. Unless you appoint a guardian, the family courts could decide who looks after your children in the event of your death.
- If you have stepchildren or other dependants. It’s important to make provisions for your dependants.
- If you get married. In England and Wales, your old will becomes invalid when you marry. In Scotland, although your previous will isn’t invalidated, it won’t include your new spouse until it is updated.
- If you get divorced. A divorce doesn’t invalidate the terms of your previous will.
- If your spouse dies. If you had left your estate to your spouse in your previous will, you need to make a new will if they pass away before you.
- When you purchase a property. Ensure your property is inherited by the person or people you choose. This also applies if you receive a windfall or own shares.
What is a mirror will?
You may wish to draw up a will that’s identical, or almost identical, to your partner’s one. This is called a mirror will and can be written whether you’re married or not. This is a common choice when partners wish to leave everything to each other and then to their children. This protects the surviving partner while providing for the children when both partners have passed away.
Each will, regardless of how similar, is separate from the other and can be amended by the person who has written it without notifying their partner. This is the downside to mirror wills and why they can often cause disputes. A way to ensure that your estate is passed on to the beneficiaries of your choosing is to include a trust in your mirror will. Our protection consultants can discuss the pros and cons of mirror wills with you if this is something you wish to consider. They can also advise you on trusts and help you to decide on the best course of action to ensure your loved ones are protected in the future.
We can assist you with making a will
Our will experts – located throughout Kent, London and Edinburgh – are ready to guide you through the process and assist you with making a will, no matter how complex your affairs are. Being professionally qualified in this area, they will make it as easy and quick as possible for you to ensure a legal will is in place. That way, you can rest assured your loved ones will be looked after should the unthinkable happen.
Just give us a call on 01322 907 000 to speak with one of our specialist consultants and take the first step towards your will preparation. If you prefer, send us an email at firstname.lastname@example.org or an enquiry via our contact form and we will reply to you as quickly as possible with more information about effective estate planning.