In this guide to Wills we will cover some of their intricacies.
What happens to the estate if you die without leaving a valid will?
Dying without a will is called ‘dying intestate’. If you don’t leave a valid will, the intestacy rules determine how your estate is distributed. The intestacy rules in England and Wales work
like this (also applies to civil partnerships):
Married with children
Spouse gets: All personal belongings e.g. car, furniture.
£250,000 absolutely plus a life interest (the right to income) in half the remaining estate.
Children get: Half of the remaining estate when they reach 18 and the remainder of the estate, when the spouse dies.
Married with no children
Spouse gets: All personal belongings e.g. car, furniture.
£450,000 absolutely and half the balance absolutely.
Half of the balance goes to the parents, but if no living parent, to brothers and sisters (with nephews and nieces stepping into their parents’ shoes if the parent is dead).
The spouse will only benefit if he or she survives the intestate by 28 days. Where the spouse does not survive for 28 days, then the intestate’s estate, will be dealt with as if there had been no spouse.
When a single person dies intestate, the estate is split very precisely, as shown below. If there are no children and, if the stated relatives at each stage are already dead, the money is passed to the Crown.
Not having a will can have a disastrous effect on your financial affairs. Making a will is a vital part of everybody’s financial planning. It gives control over how assets are distributed and, can also help reduce any IHT liability.
The rules applying in Scotland
Whether a will exists or not, certain ‘legal rights’ apply. In the event of intestacy, the spouse of the deceased also has certain ‘prior rights’ before the estate can be distributed. The order of distribution of the estate is first to apply prior rights, then the legal rights and then deal with the remainder of the estate.
The spouse’s prior rights are:
- The right to the deceased’s interest in the matrimonial home up to the value of £300,000.
- The furniture and contents of the house up to the value of £24,000.
- A sum of £42,000 if there are surviving children or remoter issue, or £75,000 if there are no surviving children or remoter issue.
The spouse’s legal rights are:
- The right of the surviving spouse to one-half of the deceased’s moveable estate if there are no children, or, to one third of that estate if there are children, and
- The right of the children to receive one third of their deceased parent’s moveable estate, or, if the other parent is already dead, to receive one-half of that estate.
The rules applying in Northern Ireland
The rules are similar to those that apply in England and Wales. The surviving spouse takes the entire estate only if there is no issue or other relatives. If there are children, the spouse gets all the personal belongings and the remainder up to £250,000. The residue is distributed between the spouse and issue depending on how many children survive. If a spouse and no children but other specified relatives survive, the spouse gets all personal belongings, the remainder up to £450,000 and the capital of half the remaining estate.
Some advantages of making a will
Having a valid will is one of the fundamental issues that any individual concerned with financial matters must address. Whenever advising on inheritance tax planning, one of the first questions you need to ask is about the will – whether one has been made and, if so, what its provisions are.
Apart from the fact that having a will means that you decide who should benefit from your estate on your death, making a will in a certain way can help to mitigate the effects of inheritance tax. We can advise you what provisions should be incorporated in a will to make it tax efficient, especially for married couples and civil partners. For most purposes, registered civil partners are treated in the same way as married couples.
The advantages of making a will are:
- The right people benefit.
- The estate is transferred/paid speedily and at lower cost.
- To look after the needs of minor beneficiaries.
- To help reduce inheritance tax for a couple through nil-rate band planning.
The right people benefit
We’ve already covered what happens when someone dies without leaving a valid will. Contrast that with the single most obvious reason to make a will: to ensure that those people (and only those) you want to benefit from your estate after you die, will in fact benefit. Those entitled under intestacy may not be the same people you actually want to benefit.
Speed of payment and lower costs
The second reason is that, with a will, your estate can be distributed to your beneficiaries faster and with fewer costs. This is because your executors (those who have agreed to administer the estate) will have been named, and they can speedily apply for probate (probate is the legal procedure by which a will is authenticated and confirms the authority of the executors – the individuals who are to deal with the estate) to administer the will’s contents. The Grant of Probate is a certificate that validates the will and authorises the executors to administer the estate in accordance with the wishes in the will.
Letters of Administration are the equivalent to probate for individuals who die without a will (dying intestate). Without a will, (usually) next of kin will have to apply for a Grant of Letters of Administration and distribute the estate in accordance with the laws of intestacy. In this respect, if relatives have a disagreement, the chances are that the professional fees for dealing with the estate will also be higher, as more work will be involved.
To look after the needs of minor beneficiaries Where those intended to benefit outright are minor children, whether there is a will or not, any funds that a minor child inherits will be held in trust for him or her until they attain age 18. This means that someone will have to act as a trustee until this time, and by using a will, the testator (the person making the will) can exercise control over who that person is.
In addition, by including a trust in the will, you can determine when and how your children should receive their benefits – perhaps not quite as early as at age 18.
To benefit from any or all of these main advantages of having a will, it is absolutely essential that your will is drafted by a professional, taking all your needs into account.
How to go about making a will
Only a professionally prepared, well drafted will, that takes full account of your individual circumstances and particular needs will ensure that your estate is dealt with in the way you would have wanted. This could also avoid you leaving behind family bitterness and disputes.
Will writing services are predominantly provided by solicitors, but in recent years independent will writers have begun to offer this service. Currently, no formal qualifications are required to offer a will writing service, and this is an important consideration when selecting someone to perform such an important task. Whilst will writing companies and individuals may offer a better service (including a willingness to call you at home) and may be viewed as being more accessible than a solicitor, professional competence is an important prerequisite.
A professional will writer will sit down with you, listen to your needs, and understand your circumstances. They are likely to ask questions to complete their appraisal. They will then prepare an appropriate will document and send it to you so that you can read and understand it. As the will, of necessity, will be drafted in legal terms (especially if a trust is involved), they should provide you with a plain English summary of the key provisions. They will be available to answer any questions you may have and also help you complete any formalities that maybe needed to ensure the will is legally valid.
Wills are not free, and there is a charge for accessing such professional know how and competence. There is no fixed charge, as some wills are fairly standard whilst others extremely complex. You should always ask for a quotation, and for confirmation of what exactly you will get for your fee.
Last, but by no means least… you should make arrangements with your solicitor or will writer, and your usual adviser, to regularly review their will arrangements. This will help ensure that your will is up to date should their circumstances change.
HM Revenue & Customs (HMRC) practice, and the law relating to taxation, is complex and subject to individual circumstances and changes which cannot be foreseen. We have based this information on our understanding of law and practice as at April 2012. We make every effort to ensure that this information is helpful, accurate and correct but it may change or may not apply to your personal circumstances.