Will FAQS – Why make a will.
Will FAQS – Why make a will. The decision to make provision for arrangements when you die is difficult. It is natural to want to put it off to another day, after all life is for the living and all the TV adverts are for old people. Why make a will and waste money on lawyers? Here are the answers to frequently asked questions of Stonehewer Moss solicitors Northwich Cheshire
A. A will is just a document that explains what you intend to happen when you die. It is an opportunity to make life easier not just financially, by leaving a gift to someone but also emotionally; too many families are torn apart because of disputes about the most trivial things uncle Joe did or did not intend to leave to Jack or Jill. If you have not made a will when you die the potential for a feud is huge, because the family members likely to be in dispute are required to work together to apply a set provision the law applies to what is called death intestate (without a will).
Q. What order is my estate (stuff) left to others if I die intestate (without a will)?
If you wish, the government advice can be viewed here http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm12111.htm. In summary, a spouse is provided for as follows:-
If the deceased was survived by a spouse or civil partner they will take:
- The chattels, a statutory legacy and a share of the residue (see Govt leaflet IHTM12121) – if there were any issue (children), parent, brother, sister or issue of brother or sister.
- All the estate passing by intestacy (IHTM12121) – if there were no issue (children), parent, brother, sister or issue of brother or sister.
The rest of the estate will be distributed to the issue or other relatives. The relatives take s follows:-
- Your children equally if no spouse;
- Your parents equally if no children or spouse;
- Your brothers and sisters equally if no parents, spouse or children;
- Nephews and nieces
- Your aunts and uncles equally if no parent, spouse, children or siblings;
- Your cousins equally
- The Crown if non of the above/ within the definition of relative.
Q. What is the statutory legacy to my spouse and the share of residue if I have no will?
A. At present it is £250,000 with the rest ( the residue) shared equally between your spouse as to half and the other half equally between your children. Remember, most houses are owned on what is called a joint tenancy with your spouse so that the full value of the house goes to him or her on your death and the statutory legacy and share of residue relates to any assets other than houses owned on joint tenancy. This can be overcome by making a will and severing the joint tenancy if, for example, your children are not also children of your spouse and you wish to ensure they share in your estate but your cash and other assets do not approach a quarter of a million. On the other hand, you may be estranged from your spouse or children and wish to ensure the rules on intestacy ( having no will) do not apply. eg you have 1 million in non house under a joint tenancy assets. Without a will your spouse gets £625,000 and your children share gross £375,000 but at present would have to pay inheritance tax on £50,000. A will is an opportunity to consider tax planning; for example, a will leaving everything to your wife in that last scenario would be entirely tax free and she could gift ( should she wish) that money that may have borne tax (£20,000 in this example) to the kids that otherwise would have gone to the tax man with at least some chance it will never have to be accounted for if she survives a good while after you.
Q. So if I get run over and die all I have worked for might go to somebody I have not kept in touch with for decades?
A. Yes. Look at the list above. If you are a child of separated parents and die with no spouse or children, a parent you may have not seen since childhood will take equally with a parent who may have devoted their life to your care. Many other examples can be thought of; after all, which of us has a family of saints and angels all of whom we hold in equal esteem? A will states exactly what you think should happen, because on death the law intervenes and what Aunty Connie and Cousin Jane think you thought counts for nothing; the law speaks for itself and they have to live with it. You are right, life is for the living and your death could leave those behind still alive with a headache.
Q. Why bother, I have nothing worth arguing about?
A. A will need not be expensive. You cannot be surprised at what people fall out about when there is a death. Your bits of stuff could be the cause of world war three and a will puts it all straight; it is definitely what you wanted. If you are so inclined, you can even set down cremation or burial and tell your executors who you do or do not want at the funrral, music to be played etc. Don`t be surprised that your nearest and dearest will be in no state to make arrangements like this within days of your death. Your will eases the minds of those left behind and lightens the burden death creates. It is not just your possessions that can be fought over after death, even carrying you out in a box can cause a major feud. A will speaks for you on any matter that might be cause for dispute in your family.
Q. What are executors?
A. As you will not be around to deal with collection, sale and dividing up your assets, a will appoints someone to act on behalf of the estate to do these things; it could be family member, trusted friend or (if you think it is too much for them) a professional who will charge the estate such as a solicitor, bank or accountant. If you appoint a professional make sure you pin them down on cost as they will try to take a percentage of the estate. Ask if they offer a fixed fee and always get a second quote from a reputable local solicitor. If you make no will you are again leaving this important role to chance. Essentially, the administrators of a death intestate will be the adults that take under the intestacy rules and you can imagine the scope for duress and fraud that offers. This can be a problem particularly when children are among those to receive gifts from the estate. One important role for an executor or administrator is paying tax, a complicated business perhaps best delegated to an accountant or solicitor. Professional executors should keep estate accounts and those who are not are still acting as trustees and may find themselves in dispute with other family members. Leaving this role to chance is again sowing the seeds of family misery on top of the natural grief a death causes.
Q. Is tax always to be paid on death?
Tax and death are both said to unavoidable. Accountants may disagree. There are three taxes at present that may be applicable after death:
- Income tax. The tax affairs of the deceased need to be resolved for the tax year (s) in which the estate is administered. The Revenue will keep adding penalty charges until a tax certificate is issued, if they filed returns in life;
- Capital Gains Tax. Money Advice Service advice is as follows:-
The good news is that the estate doesn’t have to pay any Capital Gains Tax on ‘unrealised gains’ (meaning where the asset was not sold) before the deceased died.
The estate only has to pay Capital Gains Tax if the personal representatives sell an asset and its value has risen between the date of death and the date when the asset is sold. But the personal representatives do have a tax-free allowance (£11,100 in the tax year 2015/16) for the tax year of death and the following two tax years and so not all gains will create a tax bill.
- Inheritance tax (IHT)- If you pardon the pun, this is the killer. Specialist advice cannot be more strongly recommended if you have assets that together are likely to be worth over the threshold for paying this tax, currently £325,000 for a single person. This is a minefield and this document cannot be used as a source of tax advice, as what today may not form an estate( perhaps the value of a pension fund at £200,000, for example) after future Budgets may become taxed. Taking pensions as an example, if you take advantage of the 2015 Budget changes to withdrawing pension funds post 55 and invest the capital elsewhere, that is certainly going to be added to your estate value for tax purposes ( 40% tax for the capital over the tax threshold). We are sure the chancellor in no way anticipated reaping tax off those who withdraw all their pensions and die with the bulk invested elsewhere when he introduced the measure, but you should give tax planning serious thought when looking at your pension options, together with re-consideration of the terms of your will. The Budget in 2017 made changes about family homes, summarised by the Money Advice Service as follows:-
From 2017, a £175,000 allowance will be phased in that means you can leave your home to children and grandchildren tax-free when you die. This is per person and can be transferred to your partner when you die.
This means when added to the existing £325,000 individual allowance, a couple will be able to leave £1 million without paying inheritance tax by 2020.
NB this is for a family home that you must specifically provide for by will, your family gets no benefit from this tax change if you make no will. A maiden Aunt cannot pass on her home and the estate receives this benefit, it all only applies to parents and children. Alternative tax planning may be needed by the maiden Aunt. NB 2 spouses do not incur IHT between themselves but their children on death of both will have to deal with it; making a will dealing with the house will maximise tax savings. How many householders in South East England have wills ensuring the certain tax liability on death is limited?
Q. I have given a lot to one of my dependants and think it fair to leave them out of the will, am I right that they could dispute the terms of my will?
A. There is a statute called The Inheritance (Provision for Family and Dependants) Act 1975 that does allow such persons to challenge the terms of a will in Court. They must prove the will fails to make a reasonable provision for them. In 2015 a lot of publicity surrounded the case in the appeal court called Ilott-v-Mitson-2015-ewca-civ-797 in which an estranged middle aged daughter after many years failing to communicate with her mother challenged a will leaving money to charity and won, taking a third of the estate. This is said to be a fact specific case, the daughter being in serious financial trouble but it is surprising and again emphasises that a carefully drawn will can maximise the potential for your wishes to be kept. A little details in accompanying documents to a professionally drawn will by a solicitor should help to this extent. The Ilott case had to be contested, a costly business and a will still speaks until someone spends a lot challenging it in Court and even then it is very difficult to overcome by the person challenging the will.
Q. The adverts at Christmas I see on the TV are all for old people to make a will, am I too young?
A. Sadly death is not a certain expiry date for us all and as long as you are over 18 you can make a will. Put it this way, if you are 45 the chances are you have a family you are responsible for and have built up a career with financial assets. Making a will is about being a mortal adult, not something to leave until you feel like a burden. The elderly should never be made to feel good only for an inheritance and making a will should be a pleasure, an opportunity with age to do good because it is the right thing for them, to mark a lifetime of accumulated achievement.
Q. How much does a will cost?
A. It is likely to depend on whether there is a complexity or responsibility placed on the maker over the ordinary, in which case a specific quote will be given on enquiry with a solicitor. Avoid unqualified will writers, the clue is in the title. Money advice service indicates:- A single will drawn up by a solicitor can cost between £100 and £200, depending on which part of the UK you are in. A joint will for couples could cost between £150 and £300.
For a quote or to discuss a will issue contact Stonehewer Moss solicitors, Citadel House, Solvey Road, Northwich. CW8 4DP. Tel 01606872200 e mail Dom@stonehewermoss.co.uk