A will is a legal document that sets out a person’s wishes for their estate (possessions and assets) when they die. Simply, this allows a person to choose who and how people will benefit in this situation.
Should a person die without making a will or their will is not valid, rules of intestacy apply that distribute the estate between different beneficiaries according to a fixed order of priority. This outcome might not align with the desires of the deceased.
Consequently, it’s import that you make a will. During the sensitive times surrounding a death, it is far better for those involved to have clear instruction for the sake of reducing confusion and reflecting the true wishes of the deceased.
Key benefits
Here are a number of important reasons for making a will…
- Children – Ensure any children under the age of 18 are considered in the case of a person’s passing. Specify who should be their guardian and at what age they might be able to access any funds. To that aim, trusts can be set up to control how children receive money and what they can use it for.
- Unmarried partners – Regardless of how long a relationship has lasted, unmarried partners will not receive any of an estate unless specifically addressed in the will. This is also the case for friends or relatives by marriage.
- Limiting stress – After the death of a loved one, managing logistics and understanding arrangements can feel overwhelming. A properly drafted document can alleviate some of this hardship and rule out the chances of upsetting disputes.
- Family home – Decide who has the right to reside in or own property. Without a will to outline the deceased’s wishes, partners or children may be forced to leave their home, as someone else may be entitled to part of it and they can’t pay them out.
- Executors – Nominating someone to take the responsibility to settle your affairs could make the coordination after the person has passed more efficient. If someone owns a business, their successor(s) may be named, alongside who will inherit their stake.
- Gifts – Often, people want to make a donation to a charity out of their estate especially if there is a cause they particularly support or they want to give back to society. There is a reduced tax rate for those who donate a certain proportion of their estate to charity.
You may need to make a new will when your life situation changes, either to reflect your changing wishes, or in the case of marriage – where your existing will is potentially revoked. Common life events to reconsider your will are:
- Buying a house
- Getting married or divorced
- Having children
- Acquiring a significant amount of money
- Starting/running a business
Note: You can amend your will if you wish, the details aren’t set in stone. To be sure that the latest will is exclusively considered after death, you should destroy any previous wills and include the phrase ‘All other wills that pre-date this are null and void from this date’ in the new will.
Financial reasons
Although, in the context of a loved one passing, it might seem less important to consider a person’s potential financial legacy, before they have passed away. However, you will need to take action to reduce any tax liability, so their beneficiaries receive the maximum amount.
Here are some financial implications you should know about…
Married partners
If the deceased was married or in a civil partnership, anything they leave to their spouse is exempt from Inheritance Tax (IHT), regardless of the estate’s value. As covered earlier, this does not apply to unmarried couples.
Tax-free allowance
If the value of an estate is below £325,000, IHT is not due. This also applies if a person leaves everything over £325,000 to a charitable organisation. These donations are fully exempt. Currently, IHT is charged at 40% on estates worth more than £325,000. Leaving at least 10% of an estate to charity reduces the IHT rate on the rest from 40% to 36%.
Direct descendants
Inheritance Tax-free allowance increases to £500,000 for anyone who leaves their home to their ‘direct descendants’. This includes children (biological, adopted, foster, step) or grandchildren, but not, nieces and nephews. There are specific qualifying rules in this situation, which are worth checking…
Combining allowances
A spouse’s IHT allowance can rise by the percentage of your allowance you didn’t use. Consequently, married couples can leave up to £1 million tax-free (2 x £325,000 tax-free allowances + 2 x £175,000 main residence allowances).
Unvested pension posts
As of 6 April 2027, most unvested pension funds and pension death benefits will form part of the estate and will be liable to IHT charges. Once pension pots worth tens or even hundreds of thousands are included, more families will find themselves facing a tax bill.
Gifts
Limited monetary gifts can be made without counting towards IHT. For example, there’s an annual exemption of £3,000. If this is unused, the allowance can be carried forward one year, up to a maximum of £6,000.
Gifts made far enough in advance of death will also fall out of inheritance tax consideration. It is sometimes quoted (and oversimplified) that “Inheritance Tax is a voluntary levy”, based on utilising gifts and the timing of potentially exempt transfers. Please do take professional advice before enacting significant gifts.
Record information about any gifts made, including who they went to, when they were made, and their value. Executors will need this information to work out any IHT owed.
How to make a will
This steps briefly outline the will making process…
- Consider the full estate – Calculate an estimate for total value of assets (property, savings, investments, debts).
- Divide the estate – Decide who will benefit and outline any contingency plans.
- Choose executors – Nominate someone trusted to manage affairs.
- Write the will – Finalise the specific wishes in writing.
- Sign and store – Valid wills must be signed in the presence of two independent witnesses. The will should then be stored, either at home or safely with the Probate Service, solicitors, accountants or bank.
Note: It might seem tempting to prepare your own will, without involving a solicitor, or use an unregulated writer as a cheaper alternative. Whilst this represents a more affordable option, this approach can result in a number of possible complexities and issues. Read our article on this subject for more information.
Arranging affairs
Ideally, someone should write their will at the earliest opportunity. However, it can be perturbing to think about this situation and daunting to plan ahead.
Be proactive. It’s a cliché, but nobody knows what’s round the corner and loved ones will benefit not just from the assets left to them but also from clarity the will provides, without further unnecessary upset.
Currently, Burton Sweet do not draft wills, but we are happy to recommend solicitors firms who can do so. However, we conduct IHT tax planning and/or review should you require this to make more assured decisions…
