If you don’t own a property, it is easy to assume that you don’t need a Will. In fact, there are several good reasons why you should still make one.
Leaving a Will can be of great comfort to loved ones, as you can set out your wishes with regard to what you would like to happen after your death. You can also appoint people to take on various responsibilities. If you put your requests in writing in a formal legal document, it can also help avoid disagreements between family members at a difficult time.
What your Will can contain
As well as giving details of who you would like to receive your estate, you should also choose someone to administer your estate. This can be an onerous task, as your assets will need to be collected in, valued, sold, estate accounts prepared and the money distributed in accordance with your Will. If you don’t have anyone prepared to take on this role, you can appoint a professional executor.
Your Will can include your wishes regarding your funeral and resting place, and you can also leave your personal belongings to your choice of beneficiaries.
Looking after children in your Will
Your Will can appoint a guardian to look after any children who may be under the age of 18 and you can also leave money in trust for them and appoint trustees to administer the trust fund.
This means that your children will be able to benefit from the money you leave, at the discretion of your trustees, before they actually inherit it. You can also choose the age at which you would like them to inherit, for example 25, if you feel that 18 is too young.
Why it’s never too soon to write you Will
Even if you don’t own a property or have any children, it is still a good idea to put a Will in place so that your loved ones know what you would like to happen to your estate after your death.
As you go through life, you are likely to accumulate assets and responsibilities, so making a Will now means that you can be sure your chosen beneficiaries will receive what you would like them to have. A well-drafted Will can take account of potential future changes, for example if you become a home owner.
You can also leave a Letter of Wishes, explaining your choices to your loved ones, and even detail what you would like to happen to your online assets and accounts.
It is a good idea to periodically review your Will, particularly in the event of any major life changes, for example the birth of a child. If you get married, your Will automatically becomes invalid, so it is particularly important to write a new Will then.
If you would like to talk to one of our expert Will writers, ring us on 01243 216900 or email us at firstname.lastname@example.org.
Inheritance Tax (IHT) can be a nasty surprise during the administration of a Will. New Year is the ideal time to check that you’ve done all you can to minimise the burden.
Increasing property prices has had the effect of increasing the amount of Inheritance Tax many people are paying. There are ways of reducing the amount due if you plan in advance.
The IHT threshold
IHT is payable at the rate of 40% of the value of an estate above £325,000, for example on a £400,000 estate, IHT is 40% of £75,000, ie. £30,000. The person who is appointed as executor or administrator of a Will is responsible for valuing the deceased’s estate and calculating the amount of IHT due, then making payment within six months of the date of death to HM Revenue & Customs.
IHT is not payable on money left to a spouse or civil partner or to charity. When the remaining spouse or civil partner dies, the unused IHT allowance of £325,000 is added to their allowance. If some of the allowance has been used, then only the remaining balance is passed on.
Leaving property to a family member
If you leave your primary residence to your children or grandchildren, to include step-children, then a ‘main residence nil-rate band’ is applied. This is £150,000 per person for the tax year 2019/20, rising to £175,000 as from April 2020.
This means that where your main home is gifted to your children or step-children, the total IHT allowance rises to £475,000. Any unused portion of this allowance can be passed on to a spouse or civil partner, meaning they could potentially pass on assets valued at £950,000 free of IHT, rising to £1m in April 2020.
Some gifts given during your lifetime may also have the effect of reducing the amount of IHT payable. The sum of £3,000 can be given in any tax year and any unused portion of this can be carried forward to the following tax year, although not beyond a single year.
In addition, gifts of up to £250 can be given to anyone and wedding gifts can be given to children in the sum of £5,000, grandchildren of £2,500 or others of £1,000.
Larger gifts are known as potentially exempt transfers and when someone dies within seven years of making them, IHT is payable on a sliding scale.
Setting up a trust
It is possible to leave assets to your loved ones via a trust to reduce IHT payable. Professional advice should be sought to ensure your beneficiaries receive what you want them to have and that your assets are adequately protected by the trust.
If you would like to talk to one of our expert tax, wills and probate solicitors, ring us on 01243 216900 or email us at email@example.com.