Wills – Factsheet

There are lots of good financial reasons for making a Will:

• You can decide how your assets are shared out - if you don't make a Will, the Government says who gets what. This could mean that your partner or children receive less than you intended, or that the money goes to distant family members who may not need it, at the expense of those that do
• If you aren't married or in a civil partnership your partner will not inherit automatically – accordingly drafting a Will means that you can make sure your partner is provided for
• You can make sure you don't pay more Inheritance Tax than necessary

If you die without a Will there are strict rules for deciding who inherits your assets, depending on your personal circumstances. These are known as “the Intestacy Rules”. This relates to deaths on or after the 1st of October 2014 in England and Wales are as follows.

If you are married or in a civil partnership and you have no children.

Your husband, wife or civil partner will automatically get your whole estate absolute including:

Any personal chattels, these includes any tangible movable property; such as personal items, household articles or cars. But excludes;

• money or securities for money
• Property anything used for business purposes, or
• Property held at the time your of death solely as an investment. This can include tangible movable property such as antiques, classic cars or works of art. This will fall outside the statutory legacy and form part of the residuary estate.

If you are married or in a civil partnership and you have children.

Your spouse or civil partner won't automatically get everything, although they will receive:

• Personal chattels which are any tangible movable property; such as personal items, household articles, or cars. But excludes money, security for money or anything used for business purposes.
• They will inherit the first £250,000 absolute and free of inheritance tax,.
• Half of the rest of the estate outright and your children would receive the remaining half absolute to be held, on statutory trust, when they reach the age of 18.

The statutory legacy of £250,000 that is paid to your spouse or civil partner will also increase, at least every 5 years, in line with the consumer price index.

If you are not married or in a civil partnership with your partner then they will not receive any part of your estate once you die, without a will naming them as beneficiary. Their only option is to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Again see the section below entitled 'If someone feels that they have not received reasonable financial provision from an Estate’. At a time of great emotional turmoil and stress, your partner would be “forced” to litigate against your Estate in order to receive reasonable financial provision to sustain their financial security.

If there is no surviving spouse/civil partner

The estate is distributed as follows:

• To your surviving children in equal shares (or to their children if they died whilst you were still alive).
• If you have no children, to your parents (equally, if both alive).
• If there are no surviving parents, to your siblings or to their children, if they died whilst you were still alive.
• If none of the above then to your grandparents (equally if more than one)
• If there are no grandparents to your aunts and uncles (or their children if they died whilst you were still alive)
• If none of the above, then to half uncles or aunts (or their children if they died whilst you were still alive)
• to the Crown if there are none of the above

(The flow charts at the end of this brochure demonstrates visually how these rules are applied).

If someone feels they have not received reasonable financial provision from an estate

If someone feels that they have not received reasonable financial provision from your Estate (either because of the operation of the above Intestacy Rules or because of a badly drafted home made Will) then they may be able to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 - applicable in England and Wales. To make a claim this person must have had a sufficiently close relationship with you, such as a child, step-child, spouse (and ex-spouse in certain circumstances), civil partner, dependant or cohabitee. The potential for such a claim should be identified as early as possible in order that a properly drafted Will by your legal team at Gregory Abrams Davidson Solicitors can:

• Ensure that all relevant beneficiaries are adequately provided for from the outset and,
• Effectively minimize the likely challenge post death by aggrieved and disgruntled “beneficiaries” you wish to expressly exclude from your inheritance or who would be inadvertently excluded if the Intestacy Rules applied by default.

It is always advisable to have a solicitor at Gregory Abrams Davidson Solicitors draft this on your behalf. This will ensure that the document that you create is legally valid, and considers all the more technical issues which may be relevant to your Estate (e.g. tax planning, the creation of trusts and the granting of life interests in property.)

There are several important factors to consider before you make your Will, and we will discuss the various issues with you:

1. Your Estate

You should think about what assets are likely to make up your Estate when you die, and how you would like these to be distributed. Your Estate is everything you own at the time of your death, including your money, possessions, property and investments. Before your Estate is distributed to your beneficiaries (the people you are leaving things to), all your debts must be paid, including funeral expenses and Taxes.

You should also take into account any property you own jointly. Property can either be held as joint tenants or tenants in common. If property is held under a joint tenancy your share will automatically pass to the other joint tenant on your death; you cannot leave your “share” of it to someone else in your Will. If it is held under a tenancy in common, you can leave your share to someone else on your death. The type of joint ownership you have will depend on what was agreed when you bought the property and what was registered with the Land Registry. The “answer” that “…it is in our joint names!” does not address the technical and legal ownership that actually exists upon the title deeds.

If you have a joint bank account, money in the account automatically passes to the other account holder on your death, so you can’t leave it to someone else in your will, if you are the first to die (or are deemed to be the first to die for example in a joint car fatality).

2. Legacies

You should think about who you want to benefit from your will; whether these are individual people or an organisation such as a charity, and what would be the most effective way of leaving them a legacy (a gift made in a will is known as a legacy). You should take into account that your circumstances may have changed significantly by the time of your death. You need to make sure your will is drafted in a way that does not present problems if, for example, a beneficiary dies before you, or your estate is worth significantly more or less than at the time you make your will. For example, a gift of £20,000.00 to a brother (remaining Residue to your children) may be “modest” when originally contemplated due to your entire wealth being valued at £250,000.00. However, if before death, care home expenses have reduced your available capital to £23,000.00, the legacy takes on a significant “role” and effectively exhausts the Estate, leaving nothing for your children!

It is important to appreciate the significant difference between cash gifts (pecuniary legacies), specific gifts (for example the “property I own at the date of my death” – specific devises) and the gift of Residue that comprises everything else that is left (usually the main  and primary gift!).

One important way of ensuring the primary beneficiary inherits as you wish is to ensure that you have named them as the residuary beneficiary. This is the person(s) or charity that receives the remainder of your Estate once any specified gifts have been made.

If you are leaving specific possessions to specific people, you must make sure that you give sufficient details to ensure that there is no doubt as to the identity of the possessions or who they should go to. For example, beneficiaries should be identified by their full names and their relationship to you.

3. Executors

The will should name one or more executors: these are people you choose to deal with your Estate after your death. The Executors can be relatives or friends, or a professional such as your solicitor at Gregory Abrams Davidson Solicitors (or a combination of professional and non-professional appointments).

However, it is important to note that an executor does not have to be professional. Executors can even be beneficiaries under the will, such as a spouse or civil partner. It is usually advisable to check with your proposed executors that they are willing to take on this role before naming them in your will, as it can involve significant responsibility and financial risk.

It is generally advisable that you consider appointing your solicitor as an executor, given that we will have considerable experience and expertise in administering estates. Even in cases where non-professional executors are appointed it is actually common for them to end up approaching solicitors themselves, to ask for assistance.

Executors can claim from the estate for any reasonable expenses they incur while carrying out their duties. The Executors responsibilities are extensive and include:

• locating and identifying the assets and any liabilities of the Estate
• dealing with the Administration of the Estate according to the Law
• dealing with the completion of the Tax return that will lead to the issue of the grant, as well as outstanding tax returns and all administration returns that arise throughout the administration period
• applying to the court for a grant of Probate of the will
• determining the beneficiaries and distributing the Estate in accordance with the terms of the Will
• making sure all claims and debts are received, assessed and paid if substantiated

4. Guardians

If you have any children that may still be under 18 when you die, you may need to name someone as their legal guardian.

5. Funeral Wishes

Do you have any particular wishes for your funeral? Do you want to be buried or cremated? Are there any other instructions? For example, if you want to be an organ donor this can be included in your will. However, it is also a good idea to record your wishes on the organ-donor register, or to carry an organ-donor card.

Inheritance tax (IHT) can be charged both in your lifetime and upon death. The tax is charged on the value of the assets held by you at the date of your death or at the time of any gift or Trust set up during your lifetime. The following may be relevant to your personal circumstances:

If you leave everything to your husband, wife or civil partner

In this case there usually won't be any Inheritance Tax to pay because a husband, wife or civil partner counts as an 'exempt beneficiary'. But bear in mind that their estate will be worth more when they die, so more Inheritance Tax may have to be paid then.

However, if you are domiciled (have your permanent home) in the UK when you die, but your spouse or civil partner isn't, you can only leave them £325,000 tax-free (subject to Technical Tax Elections).

You can leave up to £325,000 tax-free to anyone in your will, not just your spouse or civil partner. Inheritance Tax is then payable at 40 per cent on any amount you leave above this.

Inheritance Tax isn't payable on any money or assets you leave to a registered UK charity - these transfers are exempt.

Any gifts by you to another individual or to certain classes of favoured trusts / settlements are potentially exempt from tax provided a period of 7 years passes between the date of the gift and your death. (There is in fact the need to review gifts over a 14 year period as gifts between 7 – 14 years, whilst not taxable, do affect the “starting point” upon the “tax line” to determine whether a gift within the last 7 years is read from the “0” base line or further along).

Various lifetime exemptions may be available to you here and now to reduce potential tax upon death, such as charitable gifts, annual exemptions, normal expenditure out of income, small gifts (including in consideration of marriage). Whilst worthwhile, these exemptions would only chip away at any overall liability – but it is an additional point to bear in mind as part of an overall long term IHT planning strategy

Some specific investments can attract relief but at the same time enable you to retain a degree of control over your wealth. Products include investment on the AIM’s market and Discounted Gift Trusts. Specific advice from a suitable IFA could direct you to a portfolio of suitable investments that may reduce your exposure to IHT and at Gregory Abrams Davidson Solicitors we would be happy to provide recommendations / introductions if you do not already have a suitable adviser to call upon.

As well as making a Will, you can use a family trust to pass on your assets in the way you want to. You can provide in your Will for specific assets to pass into a trust or for a trust to start once the estate is finalised. You can also use a trust to look after assets you want to pass on to beneficiaries who can't immediately manage their own affairs (either because of their age or a disability).

You can use different types of family trust depending on what you want to achieve and the circumstances. Setting up a trust is technically complex, but is a regular and daily practice for the Private Client Department at Gregory Abrams Davidson Solicitors. The Trust may be established either during your life-time or upon death through your Will itself.

The duration of the Trust will depend upon many factors:

• It may be a simple Trust until a grandchild attains the age of 25 years.
• It may be for the benefit of a disabled or vulnerable relative who requires funds to be administered upon their behalf throughout their life.
• The Trust may be established for Inheritance Tax purposes to utilize available exemptions, but at the same time being able to provide for changing financial needs of your spouse/ civil partner and children in years to come.
• The Trusts primary purpose may be to “asset protect”, striking a balance between the needs of primary beneficiaries (e.g. a spouse) here and now, but ultimately protecting against future re-marriage so that your children are ultimate beneficiaries with wealth not being “lost” to a new husband / wife of your partner.

Certain requirements must be met for a Will to be valid (as laid down in the Wills Act 1837 (as amended) and case law):

• it must be in writing
• it must be signed and witnessed in a strict format and specific procedure
• you must be over 18 when you make it
• you must have the mental capacity to make the will and understand the effect it will have
• you must not have made it as a result of pressure from someone else

By ensuring that Gregory Abrams Davidson Solicitors oversee the entire Will writing process, we can ensure all the necessary formalities are observed and the possibility of a challenge by disgruntled and excluded beneficiaries reduced to the absolute minimum.