Taking Control; Safeguarding the Distribution of Your Assets by Making A Will
The Importance of Making a Will
A valid will is one of the most important documents you could ever put your signature to, as the consequences of failing to make a will before you die can have far-reaching effects on the people you care about most. Despite the importance of this legal document, it is still the case that only 3 out of every 10 people make a will mainly due to lack of awareness as to why a Will is needed.
The 3 most important reasons why a Will should be made are;
- Simplifying Administration Process
- Intestacy & Distribution of Assets
- Inheritance Tax
1. Simplifying the Administration Process
Before a deceased person’s estate can be distributed to various individuals a grant of representation needs to be obtained from the Probate office. All assets which comprise the estate –including money in bank accounts – are frozen until this grant is confirmed. Where no will has been made the process of applying for the grant is drawn out, causing aggravated upset and anxiety for relatives and possibly acrimonious disputes and legal costs over who should deal with the estate. A valid Will resolves these problems as persons will already have been appointed by the Will – executors – to deal with the estate and can obtain the grant and begin the distribution of the assets in a minimal period of time thus saving costs, time and unnecessary distress.
2. Intestacy & Distribution of Assets
Making a Will is the only way to ensure that the people you wish to inherit from your estate actually do so. Failing to make a Will will result in the law of Intestacy being applied, and the intestacy rules will dictate who will receive what, and often this will not accord with what you would have wanted. For example;
If you are single you may want to distribute your assets amongst selected friends and family. The rules of intestacy will not take into account any relationships based on friendship, and will distribute amongst relatives only, everything passing to the State if no relatives can be found.
If you are living as cohabitees (unmarried couple) you may want your partner to derive some benefit from your estate, perhaps to remain in the family home for example. The rules of intestacy would not take your partner into account; as far as the law is concerned, you would be treated as a single person and your partner would receive nothing.
If you are married with children you might assume that your spouse would receive everything. This is not always the case, as brothers and sisters and often your children will also have a claim.
If you are a parent, you might assume that if anything were to happen to you that your closest relatives would be responsible for the care of your children. However, the matter will need to be taken to the Courts for them decide who should have custody, a process which can be very drawn out and distressing to the parties involved. This particular consequence is of vital importance if you are a single parent or unmarried couple with children. Making a Will is invaluable by appointing Guardians to be responsible for the care of your children.
Failing to make a Will leaves control over the distribution of YOUR possessions and assets in the hands of the State. Making a Will puts the control back in YOUR hands.
3. Inheritance Tax
The family home is often the main asset and with the increase in property values more and more people have been caught in the Inheritance Tax net. Failing to make a Will will result in the rules of Intestacy being applied and these will only provide for the minimum Inheritance Tax avoidance.
The UK legislation provides that assets up to the value of £275,000 are exempt from Inheritance Tax and anything over this threshold will be taxed at 40%. When you add up everything you own – including personal items etc – you may find you are worth a substantial amount of money. In addition, you might be dismayed to discover that you also be liable to pay inheritance tax!
The following table provides a breakdown of how much inheritance tax might become payable on your estate.
- Estate Value Taxable Estate IHT Tax @ 40%
- £275,000 or less 0 0
- £300,000 £ 25,000 £10,000
- £350,000 £ 75,000 £30,000
- £400,000 £125,000 £50,000
- £450,000 £175,000 £70,000
- £500,000 £225,000 £90,000
Making a Will is one of the best tax avoidance tools you can employ – in addition to others and utilising the exemptions which are available.
Making a Will is probably one of the last – and most important – undertakings you can do for the benefit of your family and those you love…failure to make one can have far reaching and dire consequences.