Estate Planning

Planning for the Future

It is not surprising that our own mortality is not high on the list of our favourite topics of conversation.  It is seemingly a very British trait to choose not to discuss such matters openly and to hold the view that “everything takes care of itself in the end”. Unfortunately of course, this is not necessarily so.

In fact if a little preparation is made in relation to our later lives a lot of potential problems and heartache for close family and loved ones can be prevented when the inevitable happens.

Making a Will

Making a Will is an opportunity to ensure that your wishes are carried out with the minimum of trouble and expense. It ensures too that your possessions are left to the people of your choice - whether it is your husband, your wife, children or grandchildren.

Can I make my own Will?

A Will can be made by anybody, but there are many potential pitfalls in doing your own.  Ambiguous wording for example may cause problems for your family when attempting to interpret your intentions or in some cases may render a Will invalid.  If you wanted to mitigate inheritance tax or protect the home from being sold to pay for care, it would be difficult in the extreme, if not impossible! There are also specific rules relating to the signature of the Will. It is certainly advisable therefore to seek advice from a professional who will be able to ensure that your Will reflects your wishes and achieves your objectives.

Failing to make a Will could cause months of financial chaos and acrimonious legal battles if relatives can’t agree how assets should be split; yet it is a fact that 2 out of 3 eligible persons in the UK haven’t made a Will.

Without a valid Will, the surviving husband or wife may get far less than the deceased spouse would have wanted.  For example, it is estimated that 54% of married couples believe that their partner would automatically inherit their estate, yet the reality is that without a Will, this is not necessarily the case.

The death of an unmarried partner may create serious financial problems for the survivor.  Those who have not registered as civil partners will not automatically inherit assets from each other unless there is a Will.

If you die without leaving a Will, it is the State that dictates how your assets will be divided under the law of intestacy.  If there are no surviving kin, the entire estate will go to the State.

It is important to keep your Will up to date after major life changes, such as getting your first job; marriage; separation; divorce; having a child; moving house - yet it is estimated that only 41% of us do; however it is so easy with WDS Associates.  Our after care services can provide peace of mind for life.

“We all need to write a Will”

25% of us think we’re not rich enough to need a Will; but Wills aren’t just for the wealthy.  You may not have heirloom diamonds, works of art or even large chunks of cash to bequeath, but if you own your home, for example, and share it with a partner or other relative, you’ll want to make sure that they can go on living there.  A Will is the only way to do that.

If your estate is worth over £5,000, the next of kin has to apply to the probate courts before being allowed to access and deal with the money. This can increase distress at a difficult time.  A valid Will makes the process quicker and easier.

Enduring Power of Attorney

If you have money or property and you become unable to deal with your affairs because of an accident or illness (e.g. Alzheimer’s; multiple sclerosis; a stroke; a severe bang on the head) your assets may become frozen.  It could be very expensive to release your assets; it may take a year or more to complete and a large sum of money may need to be deposited with the courts.  If you take out an Enduring Power of Attorney (EPA) now, you can appoint somebody you trust to deal with your affairs on your behalf if you need them to in the future.

The law is changing.  EPAs MUST BE DONE BEFORE 1st OCTOBER 2007

“I’m too young to make a will”

Research has found that over 90 per cent of us think we’re too young to make a will; but wills aren’t just for old people - in fact, if there’s one group who ought to make a will more than any other, it’s parents of children under 18.

If you and your partner were killed, you’d want someone you loved and trusted to look after your children.  A Will lets you give that wish legal effect by nominating legal guardians for them.  (Obviously you should get the agreement of the people concerned).  If you don’t do this, the question may end up being decided by a court.

People under 18 can’t inherit money, so you’ll need to leave any money for them in a trust, which basically means that although the money is theirs, you appoint a responsible adult (or more than one) to look after it for them.  Again, this is something to plan now, not something to be left to chance.

If your own children are grown up, it’s worth talking to them about making a will when they have children of their own - it’s not something that is always high priority with busy young parents!

Protecting your home from being sold to pay for care fees

It is a question millions of us will face at some point in our lives – what to do if we, or our parents, have to go into care. Up to 70,000 elderly people in England and Wales are having to sell their homes to pay for care bills every year, and descendants are losing their inheritance as a result.

The value of your property is ignored only for the first 12 weeks of permanent nursing home or residential care.  Then, if you have no other way of raising cash for care fees, you may have little choice but to sell.

The solution is to protect your home by becoming ‘Tenants in Common’.  This means that each of you owns your half of the property.  You give your partner the right to live in the property whilst he/she is living, and you make a clause in your Will to will your half of the property away to family or friends.  In this way, the property is protected, as half a house cannot be sold to fund care.

Inheritance Tax

Inheritance tax (IHT) is levied on a person’s estate at the time of death.  If you have given away assets during the 7 years prior to death, some or all the gifts can be added to the value of your estate and taxed. All transfers between spouses are free of tax, but this puts the whole tax burden on the surviving partner to be dealt with on second death.  If the estate is valued over £300,000, IHT is chargeable on the excess at a whacking great 40% of everything above that value.

With ever rising house prices, thousands of people are realising that their beneficiaries will not inherit to the extent that they thought they would, because of the tax charge. In many instances the home has to be sold to pay the tax!

By utilising your personal allowance (£300,000) in your Will, you can reduce or eliminate the impact of this tax.  By ‘giving away’ up to £300,000 on each death into a Trust, you can save your loved ones up to £120,000 of potential tax charge, and the money can still be available to the surviving spouse.

For most of us, inheritance tax is an avoidable tax — as long as professional guidance is taken.

Mitigating inheritance tax

The number of families hit by inheritance tax (IHT) is set to treble in the next decade.  People living in England will bear the brunt of the tax as many have estates valued over the £300,000 threshold.  A 40% tax bill will come as a shock to an increasing number of families with modest assets.

You could avoid paying up to £120,000 of this unfair tax by simply making a Discretionary Will Trust. 

Soaring house prices in many areas mean that more and more of us will be affected by this tax.  Spouses inherit from each other free of inheritance tax, but this simply puts the whole tax burden on to the surviving partner to be dealt with at the time of second death.

This may appear to be a complex area, but it can easily be overcome whilst drawing up your discretionary trust Will.

Act Now.  Leave your hard earned assets to your dependants  -  not the Chancellor!