In this article we will explore why it is important to make a Will and the issue you may have to face or consider while making a Will on your own often referred as Home-made Wills. In practice we regularly witness the damaging impact of Home-made Wills on families. Here, we have produced a simple guide on writing a Will.
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What is included?
- Why it is important to draft a Will?
- What needs to be considered when writing a Will
- Choosing your executors
- NIL rate band and IHT
- Different kinds of Wills
Why it is important to draft a Will?
Everyone over the age of 18 should have a valid Will. A Will is used to help successors to deal with a deceased’s estate and affairs after death.
If someone dies without leaving a Will, it is said to have died ‘intestate’, and it means that rules of intestacy will determine how the estate is to be divided, not considering the deceased’s wishes.
The law for someone who dies intestate is quite unfair as it does not consider any children from previous marriages and partner with whom you never entered a registered civil partnership or marriage.
What needs to be considered when writing a Will
- Who you would like to nominate to administer your estate
- How to pass on your business
- How your properties, investments and belongings are going to be dealt with
- How you wish your body to be disposed of and how to pay for funeral expenses
- To who you would like to leave specific belongings
- Any legacies you would want to leave, which could be cash, specific items or charities donations
If you wish your Will to benefit your partner or children, you also need to consider:
- What is going to happen to your estate in the event that your partner and/or children are going to die with you
- If your underage children survive both parents who you would like to take care of them as guardian
- In case you decide your Will to benefit your children, but you die before their 18th birthday, whether they are to receive the inheritance on their birthday or if you would prefer to set up a trust for them
Before drafting a Will, it is important for you to have a clear idea of what you belong.
This includes details of your assets and income plus value and whether they are co-owned with someone else and any life long gift exceeding £3000 made in the last seven years.
Choosing your executors
The choice of your executor is significant as this person will be responsible for administering the estate while acting in the best interest of the beneficiaries, who are the persons who will benefit for your Will.
The executor has numerous duties, which include:
- Ascertain the assets
- Making payments to HM Revenue and Customs
- Paying any taxes due
- Apply for Grant of Probate in order to be able to manage the estate
- Collecting assets
- Paying any debts, funeral expenses and administrative liabilities
- Discharge legacies
- Distribute the estate
Bearing in mind the amount of work requested from an executor, it is important that the person is someone trusted by the person writing the Will, organised, with some expertise in finance and with time available to manage the estate.
The law states that there can be up to 4 executors as long as they can work together, and no conflict of interest arises with the beneficiaries.
It also needs to be considered the appointment of a professional as executor. This is recommended in situations of:
- Complicated estate, especially the ones that involve businesses
- Estates where an element of contention is present
- In situations where the testator thinks that there are no persons qualified enough to take on the role
Are there any taxes arising from my Will?
When properties and the estate is transferred because of a Will there are some taxes to be paid, this tax is called Inheritance Tax.
From 2007 the Inheritance Tax threshold, also known as Nil Rate Band (NRB) has been set at £325,000, which means that your estate included of your main residence property will not be taxed if valued under this amount, while any part of the estate that exceeds the NRB threshold is usually chargeable to Inheritance Tax on death at 40%.
From 6 April 2017, a ‘residence nil rate band’ may be available in addition to the NRB. The residence nil rate band is an additional nil rate amount available on top of the NRB where the deceased left a residence, to his or her direct descendants.
The NRB is usually not transferrable to descendants, but there is an exception for married couples or civil partnerships, where the unused NRB can be transferred to the surviving spouse.
The NRB is only transferrable at the first death, so for the second death there are some documents that need to be kept, which include:
- a copy of any inheritance tax forms,
- death certificate of the first partner to die
- marriage or civil partnership certificate for the couple
- copy of the Grant of Probate
- copy of the Will
It is important to note here that if all of the assets were jointly owned and passed to the surviving spouse, the whole NRB will be unused as it is considered an exempt transfer and the taxes will only be paid at the death of the second spouse.
Different kinds of Wills
This kind of Will is pretty straightforward. There are usually no trusts involved and the passing of the assets is usually given freely by the testator.
A flexible Will is made for single parents who wish to leave their estate to their children but would like to protect it by third party claims and squanderer behaviour.
Asset Protection Will:
An asset protection Will is recommended for couples worried that in the long term one of the partners may need long term care. It is designated to preserve the assets against an assessment to long term care fees and preserved for the children.
Family Protection Will:
Usually used for couples with children. It includes an asset protection on the first death by ring fencing assets against care fees, remarriage and bankruptcy. On second death, it protects the children by ensuring that the inheritance is not lavished or used by third party claims (i.e. a divorce of one of the children).
Next Generation Will:
A next generation Will is for couples with children, whose assets usually include a property and a business. It is used to protect the inheritance and save it for the children rather than it be used for nursing home care fees or other expenditures.
For further information and advice, you can ask one of Legalally’s experienced Private Clients lawyers instantly through your mobile, tablet and laptop from anywhere in the world.
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Written by our volunteer and legal writer Martina Acciaro