A will is a legal document that declares how you wish your assets to be distributed after you die.
It is important that everyone makes a will, despite their age or how big or small their estate is. By making a will you can ensure that your family and loved ones receive the gifts you want them to.
If you do not make a will then your assets will be shared out among your next of kin according to a strict order of priority called the 'rules of intestacy'. This means that the people you want to benefit from your estate - such as a partner you're not married to, or are in a registered civil partnership with - might get nothing.
Many problems can arise when you pass away if you do not make a will. The people you want to inherit your estate may not as the law of intestacy will apply. There will also be a delay in obtaining your assets and therefore your next of kin will be responsible for funeral expenses from their own funds. If you had children and their mother/father had also passed without a will, a guardian would not have been appointed and this would need to then be dealt with in court which would be a long and costly process.
A will includes specific directions on how you wish your estate to be distributed after your death, including provisions for any tangible personal property that you may own - jewellery, furniture etc as well as naming guardians for any minor children. It also indicates what sources will be used to pay any estate taxes and debts that are due, and it names an Executor who will be responsible for the settlement of your estate.
It is not only important to make a will it is also important to keep your will up to date. You should review your will after the following events:-
- You get married or divorced (a change in marital status may void your will);
- You are unmarried, but have a new partner;
- The amount of money and/or property you own changes significantly;
- Your executor or a significant beneficiary in your will dies;
- There is a birth or adoption of a child in your family;
- You change your mind about the provisions in your will.
5 Key Questions to ask yourself when making a will:-
1. Who do you want to name as your beneficiaries? This can be a single individual, a number of individuals, one or more non-profit organisation, or a combination.
2. How do you want your assets to be distributed among these beneficiaries? You can list specific items and who will receive items - such as heirlooms, the family home or other assets. You can also bequeath specific amounts to various beneficiaries. And you can designate a certain percentage of your assets to beneficiaries of your choice, once expenses and debts have been paid and other bequests made. Many people choose to incorporate a combination of these approaches. Remember, you can make changes later if needed; the key is to have a will in place.
3. Who will you name to serve as executor of your estate? This person can be a family member or trusted friend, a legal or financial professional or an institution. Keep in mind that serving as executor of an estate can be a time-consuming process involving detailed asset valuations and reporting; the most effective executor is one who has the needed skills and can dedicate the time required to fulfil these responsibilities. You may prefer to designate co-executors, including a family member or friend along with an institution.
4. Do you need to name a guardian for your minor children? If you have young children, this is an important step. You may also want to establish a trust and name a trustee to protect their inheritance.
5. Do you have complex family relationships that might require additional legal documents? For example, if you are in a second marriage involving a spouse's children from a previous marriage, you may want to talk with your solicitor about ways to ensure that your assets are divided according to your wishes.
The current inheritance tax threshold is £325,000.00 per person. This means that if your entire estate is less than £325,000.00 no inheritance tax is payable.
Married couples and registered civil partners are also allowed to pass assets to each other during their lifetime or when they die without having to pay Inheritance Tax. It doesn't matter how much they pass on - as long as the person receiving the assets has their permanent home in the UK. This is known as spouse or civil partner exemption.
If someone leaves everything they own to their surviving spouse or civil partner in this way it's exempt from Inheritance Tax. It also means they haven't used any of their own Inheritance Tax threshold or nil rate band. This can be used to increase the Inheritance Tax threshold of the second spouse or civil partner when they die - even if the second spouse has remarried. Their estate can be worth up to £650,000.00 in 2014 to 15 before they owe Inheritance Tax.
The threshold can only be transferred on the second death, which must have occurred on or after 9 October 2007 when the rules changed. It doesn't matter when the first spouse or civil partner died. However, if it was before 1975 the full nil rate band may not be transferrable as the amount of spouse exemption was limited then.
You can reduce your inheritance tax by making provisions in your will for gifts to a "qualifying charity" (A qualifying charity is an organisation that's recognised as a charity for tax purposes by HM Revenue & Customs (HMRC)
You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die.
Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it.
Wedding gifts/civil partnership ceremony gifts
Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:
-parents can each give cash or gifts worth £5,000
-grandparents and great grandparents can each give cash or gifts worth £2,500
- anyone else can give cash or gifts worth £1,000
You have to make the gift on or shortly before the date of the wedding or civil partnership ceremony. If the ceremony is called off and you still make the gift this exemption won't apply.
You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can't give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether.
You also can't use your small gifts allowance together with any other exemption when giving to the same person.
Regular gifts or payments that are part of your normal expenditure
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.
-monthly or other regular payments to someone
-regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
- regular premiums on a life insurance policy - for you or someone else
You can also make exempt maintenance payments to:
-your husband, wife or civil partner
-your ex-spouse or former civil partner
-relatives who are dependent on you because of old age or infirmity
-your children, including adopted children and step-children, who are under 18 or in full-time education
We understand how sensitive these types of matters are, our knowledgeable team are dedicated to ensuring the process is made as easy as possible for you and your family