Details matter if you want to pass your money on to the heir of your choice
You can’t take it with you, but you can choose where your money goes when you die. “Testamentary freedom”, the right to bequeath your estate to whoever you wish, is an old principle in English law. Despite today’s needlessly complex and restrictive rules on inheritance tax, the Government keeps out of what happens to the rest of your estate.
It doesn’t have to be that way. In France, thanks to the
rule, you may have discretion over just a quarter of your estate, should you have three living children when you die.
In Germany, the forced share principle of makes it almost impossible to disinherit your children, grandchildren, spouse or parents. To do so requires both parties to sign a notarised agreement.
By contrast, our Anglo-Saxon model stands out for its emphasis on strong property rights and contract enforcement. It errs on the side of individual choice rather than judging those choices, quietly recognising the dangers to a free society in weakening that principle, even for hard or distressing cases.
But even in Britain you need to take care to be certain your final wishes will be honoured. There are limited exceptions, as a case this week showed. When Wynford Hodge died aged 94, the Pembrokeshire caravan park owner left a £1.5m estate. He also explicitly wrote his long-standing partner, Joan Thompson, out of his will in favour of tenants who had helped him in his last years.
That will has now been changed by the courts. The judge ruled that Mr Hodge was mistaken in believing Ms Thompson was financially secure on her own. He granted her a cottage from the estate worth £225,000, and a further £190,000 for refurbishment and financial support.
Despite testamentary freedom, a narrow class of claims like Ms Thompson’s are allowed under the 1975 Inheritance Act. This affects a will if it fails to make “reasonable financial provision” for a spouse, cohabitant, child or dependant.
Even this act remains within strict limits. Except for a spouse or partner, provision is restricted to that necessary for maintenance. And in general the emphasis is on providing income rather than transferring capital. Ms Thompson’s case is unusually generous, because she has been granted outright ownership of a cottage.
In many cases, a life interest only might have been arranged, out of respect for the original will.
The importance of testamentary freedom remains strong, as was reaffirmed by a ruling from the Supreme Court in 2017. A mother’s will had disinherited her estranged daughter in favour of several charities. The daughter challenged the will and received £50,000 for maintenance, a figure then tripled by the Court of Appeal. The charities went to the Supreme Court – and it unanimously cut the daughter’s award to £50,000. The law is on your side, but to avoid legal wrangles there are simple steps that everyone should take. These can help ensure your money goes where you want it to after you die.
First of all, make a will and review it regularly. Research this year suggested two thirds of UK adults had not made a will. Don’t leave the fate of your wealth to be decided by others.
Second, use a solicitor to write your will, and ask if the 1975 Act could affect you. Even if not, it is easy to make serious errors without a solicitor. For instance, witnesses to a will cannot be beneficiaries. If you write your own will at home with a kit and ask relatives to witness it, you may inadvertently disinherit them.
To save money, you can use the free solicitor services provided during Free Wills Month twice a year. The next is scheduled for October.
Third, if you want to be extra sure, get a doctor to certify that you are of sound mind when you make your will, to avoid a challenge on grounds of incapacity. Finally, if you are married and considering a “mirror will”, talk to your solicitor about how to protect its provisions in the future if your widow or widower remarries.
The power to pass on our wealth as we see fit also brings a burden of responsibility – it is down to each of us to make the right choices. Prepare properly to make the best use of your freedom.
The right to leave your money to whoever you like has benefited charities such as the Blue Cross