How to leave a lasting legacy
For those of us who feel the slight pangs of guilt at our sedentary approach to estate and financial planning, it’s comforting to know that you’re not alone – only a third of adults in the UK have a will. And a recent survey found that one in five adults in the UK plans on leaving no inheritance at all.
But whether you feel you have paid out enough in your lifetime for your children or if the children’s inheritance has been spent on the finer things in life, online probate guidance service Simplify stresses the importance of creating and maintaining an up-to-date will.
Too busy planning your life to plan for death?
The statistic that more than two-thirds of adults in the UK have no will is often touted, no doubt, in the hope that it will spur people on to making those important decisions that inevitably get moved to the bottom of the to-do list. But there is an important message.
Will writing and estate planning are not just about who gets what. There are far more salient decisions to be made; decisions that, if made incorrectly or left to chance, could have a significant impact on your family and loved ones, as well as the legacy you wish to leave.
What happens if I don’t leave a will?
Your estate will be subject to the rules of intestacy. In theory, these rules are devised to provide for your closest family, but in reality the changing profile of household structures means that the rules are often not in sync with the modern family and fail to provide for your loved ones.
For many, the intestacy rules are sufficient to ensure loved ones are protected. For example, in families with a spouse/civil partner and children, the spouse/civil partner will inherit all the deceased’s possessions, the first £250,000 of the estate and a life interest in half of the remainder. A life interest is part of a trust, giving them the right to income from, or occupation of, the assets in trust. It’s important to note that they do not own these assets, they simply benefit from them. The children will inherit the remainder and the right to the part of trust on the death of the spouse/civil partner.
However, consider situations where you have lived with a partner for more than 30 years but you have no formal recognition of your union. In this situation, the rules of intestacy do not provide for you. It’s also important to consider that in addition to gifting cash and other assets, wills should also confirm guardians of any young children and wishes for funeral arrangements.
Left with a taxing problem
The issue that comes up time after time when planning to leave a legacy is Inheritance Tax (IHT). This year’s budget not only saw a freeze on IHT-free allowances but also an indication of the hard line the government is set to take on tax avoidance.
However, there is a difference between tax avoidance and considered planning within the law that ensures your loved ones inherit the legacy you intended for them. Trusts and lifetime giving are increasingly seen as the most effective ways to achieve this, with life policies placed in trust being cited as one way to reduce this burden.
If you decide to name a life policy in a will or nominate one to a beneficiary, they are classed as assets in your estate and as such are liable for IHT. However, if a life policy is written in trust, this can be paid at the trustee’s discretion immediately after death and is not liable for IHT. You can leave the trustees a letter of wishes that while not binding on them, gives the names of those you would like to receive the policy proceeds.
And finally…
You now have your will professionally drafted using clear terminology, and it is signed and witnessed correctly. You might have set up a regular ‘review and revise’ programme to ensure your will is up to date with all tax policy and legislative changes. You’ve taken tax and financial advice and set up relevant trusts or other lifetime plans to ensure your loved ones feel the most benefit from your legacy.
One last question: does anyone know where to find this will or evidence of trust funds? The recession may not have quite sent us back to depositing cash under our mattresses, but it is not uncommon for people to store important documents in ‘safe’ places within the home, that are then hard to find, particularly if the family doesn’t know they exist.
There are a number of options for storing your will. Most solicitors and banks offer storage solutions, as does the Principal Probate Registry in London. If you have gone to the effort to ensure your family is provided for, make sure that someone knows about it.
Simplify offers online guidance and assistance on everything related to probate: www.simplify.co.uk
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But whether you feel you have paid out enough in your lifetime for your children or if the children’s inheritance has been spent on the finer things in life, online probate guidance service Simplify stresses the importance of creating and maintaining an up-to-date will.
Too busy planning your life to plan for death?
The statistic that more than two-thirds of adults in the UK have no will is often touted, no doubt, in the hope that it will spur people on to making those important decisions that inevitably get moved to the bottom of the to-do list. But there is an important message.
Will writing and estate planning are not just about who gets what. There are far more salient decisions to be made; decisions that, if made incorrectly or left to chance, could have a significant impact on your family and loved ones, as well as the legacy you wish to leave.
What happens if I don’t leave a will?
Your estate will be subject to the rules of intestacy. In theory, these rules are devised to provide for your closest family, but in reality the changing profile of household structures means that the rules are often not in sync with the modern family and fail to provide for your loved ones.
For many, the intestacy rules are sufficient to ensure loved ones are protected. For example, in families with a spouse/civil partner and children, the spouse/civil partner will inherit all the deceased’s possessions, the first £250,000 of the estate and a life interest in half of the remainder. A life interest is part of a trust, giving them the right to income from, or occupation of, the assets in trust. It’s important to note that they do not own these assets, they simply benefit from them. The children will inherit the remainder and the right to the part of trust on the death of the spouse/civil partner.
However, consider situations where you have lived with a partner for more than 30 years but you have no formal recognition of your union. In this situation, the rules of intestacy do not provide for you. It’s also important to consider that in addition to gifting cash and other assets, wills should also confirm guardians of any young children and wishes for funeral arrangements.
Left with a taxing problem
The issue that comes up time after time when planning to leave a legacy is Inheritance Tax (IHT). This year’s budget not only saw a freeze on IHT-free allowances but also an indication of the hard line the government is set to take on tax avoidance.
However, there is a difference between tax avoidance and considered planning within the law that ensures your loved ones inherit the legacy you intended for them. Trusts and lifetime giving are increasingly seen as the most effective ways to achieve this, with life policies placed in trust being cited as one way to reduce this burden.
If you decide to name a life policy in a will or nominate one to a beneficiary, they are classed as assets in your estate and as such are liable for IHT. However, if a life policy is written in trust, this can be paid at the trustee’s discretion immediately after death and is not liable for IHT. You can leave the trustees a letter of wishes that while not binding on them, gives the names of those you would like to receive the policy proceeds.
And finally…
You now have your will professionally drafted using clear terminology, and it is signed and witnessed correctly. You might have set up a regular ‘review and revise’ programme to ensure your will is up to date with all tax policy and legislative changes. You’ve taken tax and financial advice and set up relevant trusts or other lifetime plans to ensure your loved ones feel the most benefit from your legacy.
One last question: does anyone know where to find this will or evidence of trust funds? The recession may not have quite sent us back to depositing cash under our mattresses, but it is not uncommon for people to store important documents in ‘safe’ places within the home, that are then hard to find, particularly if the family doesn’t know they exist.
There are a number of options for storing your will. Most solicitors and banks offer storage solutions, as does the Principal Probate Registry in London. If you have gone to the effort to ensure your family is provided for, make sure that someone knows about it.
Simplify offers online guidance and assistance on everything related to probate: www.simplify.co.uk
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