How to write a will
When do I prepare my will?
The earlier the better. There is a lot of legislation around Inheritance Tax (IHT), which means the earlier you start planning, the more tax benefits you may be able to benefit from. All adults should have a will, but if you’re single with no property or children, it is less of a priority.
Why should I have a will?
Wills can be helpful for matters other than tax and assets. For instance, if you have children, you can state whom you would want as guardians, if anything happened to you before they turn 18. You can also incorporate a trust for them. The wealthy might not want to leave £20m to a child who is partying at university, so you can establish a trust that lays out when and how they come into the money.
You can also set up trusts for charitable giving within a will. They have generous tax breaks and you could also bring the overall IHT rate on other assets down from 40% to 36%, depending on how much you give. People can have very specific ideas for their funeral arrangements, which should be clearly specified, along with who you wish to appoint as Executors.
Do I need to get legal advice?
You don’t have to use a solicitor, but your will must be witnessed by two people who are not beneficiaries (or spouses of beneficiaries). Using a ‘DIY kit’ is better than not having a will at all, but I recommend you get professional advice. Sometimes couples don’t want to talk about wills. A good adviser will help you have that conversation and facilitate the correct thought processes. 
How much is Inheritance Tax?
IHT currently stands at 40%. However, the first £325,000 of your estate is usually effectively tax-free. So, if your estate is worth £325,000, no tax will be due, assuming substantial gifts haven’t been made previously. For a married couple or civil partners, this nil-rate band for each partner is often effectively combined, so it rises to £650,000. Anything over those amounts will usually be taxed. If your assets are worth, say, £1m, you pay 40% on £675,000 for a single person, and on £350,000 for a couple. There are tax exemptions when it comes to IHT and this is where it can often be beneficial (if affordable) to gift early.
If you gift a child the money to buy a first home, for example, and you survive for another seven years, the gifted money ceases to be part of your estate and will not be taken into account when it comes to IHT. Each person also has an annual allowance of £3,000, which they can gift; these are immediately exempt from IHT. Either way, the seven-year rule makes it beneficial to plan ahead and gift early. The number of people paying IHT in the UK is quite small: 19,000 people in 2011-12, only 4% of taxpayers, paid, giving £2.91bn to the government.
Do I need to revisit a will?
Yes, particularly if there have been subsequent births, marriages or divorces. If you have inherited money, you may also need to revisit your will, as the inheritance could take your net worth over the nil-rate band. Normally, you should review your will every five years.
What happens if I don’t have a will?
Without a will, your surviving legal partner, if you have one, usually gets the house and possessions, if these were held by you jointly. However, if there is no will and you have assets of, say, £20m in your sole name, the surviving partner would only automatically get £250,000 of that. The rest would be held in a trust structure and would be passed on via the rules of intestacy. For high net-worth individuals in particular, you would not want to rely on these rules as it would be unlikely that they would lead to the outcomes you would have chosen yourself.
Dominic O’Connell is head of tax, trust and estate planning at Coutts
The earlier the better. There is a lot of legislation around Inheritance Tax (IHT), which means the earlier you start planning, the more tax benefits you may be able to benefit from. All adults should have a will, but if you’re single with no property or children, it is less of a priority.
Why should I have a will?
Wills can be helpful for matters other than tax and assets. For instance, if you have children, you can state whom you would want as guardians, if anything happened to you before they turn 18. You can also incorporate a trust for them. The wealthy might not want to leave £20m to a child who is partying at university, so you can establish a trust that lays out when and how they come into the money.
You can also set up trusts for charitable giving within a will. They have generous tax breaks and you could also bring the overall IHT rate on other assets down from 40% to 36%, depending on how much you give. People can have very specific ideas for their funeral arrangements, which should be clearly specified, along with who you wish to appoint as Executors.
Do I need to get legal advice?
You don’t have to use a solicitor, but your will must be witnessed by two people who are not beneficiaries (or spouses of beneficiaries). Using a ‘DIY kit’ is better than not having a will at all, but I recommend you get professional advice. Sometimes couples don’t want to talk about wills. A good adviser will help you have that conversation and facilitate the correct thought processes.
IHT currently stands at 40%. However, the first £325,000 of your estate is usually effectively tax-free. So, if your estate is worth £325,000, no tax will be due, assuming substantial gifts haven’t been made previously. For a married couple or civil partners, this nil-rate band for each partner is often effectively combined, so it rises to £650,000. Anything over those amounts will usually be taxed. If your assets are worth, say, £1m, you pay 40% on £675,000 for a single person, and on £350,000 for a couple. There are tax exemptions when it comes to IHT and this is where it can often be beneficial (if affordable) to gift early.
If you gift a child the money to buy a first home, for example, and you survive for another seven years, the gifted money ceases to be part of your estate and will not be taken into account when it comes to IHT. Each person also has an annual allowance of £3,000, which they can gift; these are immediately exempt from IHT. Either way, the seven-year rule makes it beneficial to plan ahead and gift early. The number of people paying IHT in the UK is quite small: 19,000 people in 2011-12, only 4% of taxpayers, paid, giving £2.91bn to the government.
Do I need to revisit a will?
Yes, particularly if there have been subsequent births, marriages or divorces. If you have inherited money, you may also need to revisit your will, as the inheritance could take your net worth over the nil-rate band. Normally, you should review your will every five years.
What happens if I don’t have a will?
Without a will, your surviving legal partner, if you have one, usually gets the house and possessions, if these were held by you jointly. However, if there is no will and you have assets of, say, £20m in your sole name, the surviving partner would only automatically get £250,000 of that. The rest would be held in a trust structure and would be passed on via the rules of intestacy. For high net-worth individuals in particular, you would not want to rely on these rules as it would be unlikely that they would lead to the outcomes you would have chosen yourself.
Dominic O’Connell is head of tax, trust and estate planning at Coutts
Top Tips
- Don’t put off planning.
- Planning early can be beneficial for tax purposes, but make sure you have enough money left to live on.
- It’s not all about tax – you can also name guardians for your children.
- It is wise to seek professional advice.
- Revisit your will – if it accurately represents your wishes, you can just get on with your life.