Avoid bitter battle of wills
WRITING a will is one of the most important things you will ever do, yet half of us never get around to it. Even those who do knuckle down often fail to update their will as family circumstances change and risk bequeathing a mess.
A will can put your finances in order, legally protect and support loved ones, and greatly reduce the chances of a nasty family dispute, said Emma Watson, head of financial planning and advisory services at Rathbone Investment Management.
Just remember that it also needs updating. She added: “Particularly after life events such as weddings, divorces, births of children and grandchildren, and moving jobs.”
Here are some issues to consider.
THINK OF DEPENDANTS
If you have children or step-children, writing a will can protect them financially and make sure they are cared for when you are gone. “Consider how your estate is divided up, and who you would entrust to care for any children under the age of 18,” Watson said.
Speak to those who you’d want to appoint as guardians first. “If your choice is not set out in a legally binding document, the decision could be left to the courts.”
PROTECT YOUR PARTNER
Cohabiting couples have fewer legal rights than married couples and civil partners, and are largely unprotected if one partner dies,Watson said. “They have no legal right to property and assets, unless jointly owned.”
This can cause problems if a couple has children, as the surviving partner may have no right to continue living in their home. “It is crucial that you write a will expressing your wishes regarding children and assets.”
PLACE ASSETS IN A TRUST
You may be able to reduce your exposure to inheritance tax by placing assets such as cash, property or investments into a trust. However, Watson says trust rules are complicated and have not changed over the years. “You could be taxed as you pay in or take money out, so seek advice if considering this option.”
GIVING TO CHARITY
Anything left to charity is free of inheritance tax, so that donations included in your will can be a tax efficient way of passing money on. “If 10 per cent of your net estate is left to charity the rate of IHT rate is reduced from 40 per cent to 36 per cent.”
MAKE A LASTING LEGACY
If you have no surviving relatives who can inherit under the rules of intestacy, your estate will be deemed as ‘bona vacantia’, meaning ‘vacant goods’, and passed to the Crown.
There are 6,998 unclaimed estates in the UK, official figures show, but a will can prevent that, Watson added. “You can pass on your estate to whomever you wish, such as a charity or close friend.”
Without a will, your assets may be distributed in line with intestacy rules, said Alexandra Price, director of financial planning at Charles Stanley. “Your wealth could pass to the wrong people and the taxman could benefit.”