Since the new budget announcements many of us are concerned as to how the changes may apply...
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If you die without a Will, your estate will be divided according to a set of default rules known as “the intestacy rules”. This may mean that your estate passes to someone you did not intend to benefit. Whilst it is prudent for everyone who is over 18 years of age to make a Will, some key times to consider when making/reviewing a Will are:
Cohabiting with a partner: English law does not recognise a common law partner (there is no legal concept of “common law husband” or “common law wife”) so unless you have made a Will, your partner will not inherit your estate. Instead, it will pass in accordance with the Intestacy rules to your children/parents/siblings. Whilst your partner could make a claim against your estate, this can be time consuming and costly and cause a lot of upset.
Marriage: Even if you have already made a Will, if you did not make it in anticipation of your marriage, it will be invalid if you marry. Marriage or civil partnership has the effect of revoking your current Will so unless it is at least republished after your marriage, your estate will be divided in accordance with the intestacy rules. It is particularly important to consider your Will when second marriages are involved, to avoid causing problems between the two families. You should also note that even if you are married and have children, if your estate is worth over £250,000 and you do not have a Will, it will not all pass to your spouse under the intestacy rules (a shock to many).
Divorce: Until you have a Decree Absolute, you remain married to your soon-to-be ex-spouse who will therefore inherit under the intestacy rules. This is also true if they are a beneficiary under your Will. It is therefore important to make/update a Will so that your wishes are followed. Following your divorce, if you have ongoing obligations to your spouse it is also important to ensure that your Will reflects these so that your former spouse does not bring a claim against your estate.
Children: In your Will, you can appoint legal guardians to take care of your children. Whilst this does not displace parental responsibility, it will show who you would like to care for your children and can give parental responsibility in cases where you are the last surviving parent. It is also possible to include trusts in your Will to delay your children’s inheritance; otherwise they will legally inherit once they turn 18 and at a time when they may not be mature enough to handle a large sum of money.
Owning a property: When you purchase a property with someone else, it is possible to buy the property as joint tenants (meaning your share passes automatically to them by survivorship and outside your Will) or as tenants in common (meaning your share passes in accordance with your Will). It is also possible to include trusts in your Will to give someone a life interest or right of occupation in your property, so that you can ensure someone else inherits it once that person dies.
Inheritance Tax planning: A new property nil rate band will come into effect from 06 April 2017 relating to your primary residence if it passes to direct descendants but there are conditions on this. It may be worth revisiting the terms of your Will to ensure that it is tax efficient. Trusts can also be incorporated into a Will for a variety of reasons including tax mitigation or to hold assets for a disabled beneficiary or to try and ring-fence assets from third party calls.
If you have any questions or would like to discuss matters, please contact our Private Client Department.
This article was written by Charlotte Coombs.