Martha Swann, Associate at Wilsons Solicitors LLP answers all the burning questions you may have about making a will.
I’m married and just want to leave everything to my spouse. We have no children. Surely I don’t need to make a will to do that?
A lot of people think this way. One thing that all humans tend to have is “optimism bias” – the idea that you are more likely to experience good outcomes than other people. This (unfortunately) is not the case – unfortunately bad things happen to good people!!
You are absolutely correct that your estate will automatically go to your spouse (in its entirety if you don’t have children) without a will in place. However, what if your spouse has predeceased you and you haven’t had time to put a will in place before something happens to you? For example, if you and your spouse were in an accident, then you could end up in a situation where one of you dies and the other not long afterwards. You will then end up with an estate that is subject to the intestacy rules (ie what happens when there is no valid will in place). In that situation, your estate could go to your parents (if they are still alive); but if not then to your siblings …the list of possible relatives who may inherit goes on! You may be fine with this – however, not everyone has an excellent relationship with their extended family. If you were the first to go and your entire estate had gone to your spouse and they still did not have a will, it would go to their family instead – again, not everyone gets on with their in-laws! Get a will for that situation.
I’m married with children – what happens to my estate if I don’t make a will?
If you have not made a will when you die, then your estate will be subject to the intestacy rules. These rules kick in if there is no legally recognised testamentary document executed by the deceased – they can also apply if a will has been drafted but there are no beneficiaries left because the named ones have predeceased (for example).
If you have a registered legal partner, then they will inherit the first £270,000 of your estate plus all your personal possessions. They will also receive half of the remainder and the other half of that will be divided between your children.
There are several issues that could arise here which it is worth considering:
- If your estate is possibly dutiable for inheritance tax (before considering any reliefs) and it does not all pass to an exempt beneficiary (ie your spouse) because of intestacy, then there could be an inheritance tax bill on the amount passing to your non-exempt beneficiaries (ie your children);
- This could also cause a second inheritance tax bill on the death of the surviving spouse, as if the sum passing to the children on the first death exceeds the available nil rate band (the amount you have free of inheritance tax – currently £325,000) then there would not be that sum available for the surviving spouse’s estate later (ie they can be added together on the second death, so the spouse could have had £650,000 to use against their estate’s value). The ability to transfer nil rate bands between spouses is a very useful tax mitigation tool, and worth ensuring you protect it. To do this, you need to write a will!There are ways to try and solve this problem if it does arise and no will has been written, but it can be costly and take time to sort out at a time when your family will be grieving.
- If your children inherit under intestacy, they are entitled to their capital at 18 – this might mean a large lump sum going to children who may not be able to manage large sums of money at that age. Writing a will and stipulating a later age might be more sensible.
- If your children are over 18 but unable to manage their own money or that inheritance is at risk due to bankruptcy or impending divorce, then not having a will seems be a real false economy. Also, if your child is on means tested benefits, then a large lump sum might impact on their financial situation. There are ways of protecting assets in a will where these situations arise, so please do talk to a professional about your personal circumstances.
Can my spouse and I have a joint will?
Yes, you can! A joint will is also referred to as a mirror will – this means you and your spouse’s wishes are the same/similar. However, individuals can change their wills at any time during their life. Spouses having mirror wills does not stop a change from being made by either one of those individuals. That is why it is important to discuss your personal circumstances with your solicitor. For example, where people have remarried and there are children from previous relationships, it may be that a mirror will is not appropriate. Every situation is different!
NB There are rare forms of wills called “mutual wills” which contain legally binding agreements to not change a will after the death of the first person, but these are very rare and specialist advice needs to be sought if this is what you have or what you think you want!
What makes for a good Executor? And how many should I appoint?
Executors are legally responsible for ensuring the wishes in your will are carried out. The role is an important one and an executor can be held personally liable for mistakes or errors made during the administration. That sounds scary but it’s important that you choose someone you trust, who is organised and who will get on with the job in a timely manner.
You can appoint as many executors as you want but only a maximum of four can be named on a Grant of Probate and usually, it’s better to not have too many cooks…it’s also worth noting that if you name an executor you are not forcing them to act. They have the choice to renounce or sit on “the sub’s bench” – more formally referred to as having “power reserved” to them.
Who looks after my estate if I don’t leave a will naming my executors?
If you have a will but there are no executors left then one of the residuary beneficiaries could take up the role of administrator of your estate. If you name executors and they die then their executors will take on the job of finalising your estate. If you don’t make a will at all, then one of the beneficiaries under the intestacy rules would be the best place to deal with it. There are a number of potential options when this situation happens – best to cover yourself and save time and money by ensuring your will allows for alternatives.
What happens if I make a will but subsequently want to change it because my circumstances have changed?
As long as you are alive and have the capacity, you can update your will whenever you like. Too many people just think that once their will has been made that is it – and, in some cases, that may be so, but every time a life event happens to you or a member of your family, it’s worth thinking about whether your will needs reviewing. I would recommend thinking about it every five years or so – your circumstances (and the law itself!) change, so sometimes a quick review is all that is required.
Will my current will become invalid if I get divorced?
Yes, your will is read after divorce as if your spouse has predeceased you. I would recommend updating your will early in a divorce process in any event, in case anything happens to you before the divorce is finalised.
What kinds of things can I make provision for in my will?
Your will deal with your “estate” – that is everything you own, including property, money and personal effects. It will also deal with some joint property if it is held as “tenants in common”, as holding property this way means your share will pass under your will. If the property is held as “joint tenants” then it will automatically go to the surviving owner(s) so it is worth checking how shared assets are held. With property, this is easily done as the Land Registry documents will indicate this. If it is other assets, there should be some evidence to show that it is intended to be held jointly in a particular way.
Your will is a legal document showing your wishes about where you would like your assets to go. This could be to individuals, such as your spouse or children/grandchildren or to charities or other organisations. You can make money gifts or gifts of personal effects to whoever you wish. Additionally, you can outline your funeral wishes in your will.
If I leave something to someone who dies before me, what happens?
If a beneficiary dies then it is said that a gift to that beneficiary under a will “fails”. If no alternative beneficiary is named, then that gift will go back into your estate and will be distributed to other beneficiaries.
What taxes are chargeable on my estate after I die, and who sorts them out?
There are three potential taxes that an estate will have to pay after someone dies: income tax; capital gains tax and inheritance tax. It is the responsibility for the Executors to know this and to pay what needs to be paid when it needs paying!
For a deceased person’s estate, income is paid gross – this includes bank/building society interest and dividends. As such, an executor will need to account for this to HMRC at the end of the administration. If there are only small sums, this can be dealt with very easily in an informal process by confirming the amount and sending the tax due.
If the income tax exceeds £10,000, the estate was worth more than £2.5million or more than £500,000 has come into the estate from the sale of assets by the executors (for deaths post 6 April 2016), then an estate tax return will need to be filed with HMRC.
Capital Gains Tax:
An estate has the same capital gains tax allowance as an individual (£12,300 for 20/21) for the year in which someone dies and the following two years. When assets are sold for sums higher than the value confirmed at the date of death, then there are potential capital gains tax liabilities to consider. This includes expensive personal items as well as investments, and property. It is worth taking specific advice about this as there are different reporting timeframes for these – for example, for capital gains tax arising on the sale of property, this needs to be reported and paid within 60 days of the sale. There are also ways of possibly mitigating capital gains so worth discussing this with a professional.
Inheritance Tax (“IHT”) can be paid on lifetime gifts as well as on the value of an estate when someone dies, so you should always take specialist advice if you think there might be a liability to consider or if large gifts have been made in the seven years before someone has died. IHT can be quite fiddly as there are lots of reliefs and exemptions that could be applied to someone’s estate.
Any IHT paid on an estate is taxed at 40%. IHT is due on the last day of the sixth month after the date that someone dies. So, if someone dies on 5 January 2021, then IHT would be due on their estate by 31 July 2021 otherwise interest will be applied to any sums due. Executors are responsible for paying IHT – and they can be personally liable if they fail to pay and distribute the estate before any tax matters are settled.
As a quick overview:
- Every individual has £325,000 free of inheritance tax. This is called your Nil Rate Band. As such, if your estate if worth less than this, then it will not be liable for IHT (unless you have made large gifts – see point 4!);
- If a spouse leaves their entire estate to their spouse, then when the surviving spouse dies, they have potentially got a double Nil Rate Band allowance (£650,000);
- You can make gifts up to £3,000 in any one tax year and this will be considered tax free and so won’t affect your estate’s IHT (and that £3,000 can be rolled over to the following year if not used to a maximum of £6,000).
- Any lifetime gifts made in the 7 years prior to someone’s death (which exceed the annual exempt amount of £3,000 above) can reduce your Nil Rate Band. So, if you made a gift of £50,000 to your child then you would have a Nil Rate Band of £275,000 for 7 years. But after 7 years, that gift is ignored and becomes tax-free. There are different rules if you want to put money into trusts during your lifetime, so please do take advice if you are considering this!
- There is an additional Residence Nil Rate Band allowance of £175,000 (20/21) which can be used if you leave your main residence to your direct descendants. You can also inherit your spouse’s residence nil rate band if not used – so this can add an additional allowance of 350,000 which could be used against the value of your estate. Even if you have sold your property and moved into care (for example) then it may be possible that there is a downsizing allowance available here so it is worth taking advice on this.
What kinds of people can be witnesses to my will? Are there any restrictions?
Anyone over the age of 18 and who are not named in the will itself can be witnesses to your will. They must be with you when you sign the will and see you sign it before signing it themselves.
In England & Wales, you can now also witness wills virtually!
Where should I keep my will?
Somewhere safe! A lot of solicitors firms will look after wills for free (although some do levy a charge). However, if you opt to keep it at home, then make sure you have copies saved elsewhere and ensure that the original is in a fireproof box. Do not write on the will once it has been executed or attach anything to it.
What are the tax benefits of leaving charitable gifts in my Will?
We are incredibly charitably minded in this country. I grew up with Comic Relief and Children in Need making eye-watering sums for incredibly admirable causes. Just look at how much money the London Marathon has made since its inception!
Making regular payments during your life to charity is admirable – it helps them continue their work. However, a charitable gift in your will not only helps the charity but also can be an excellent tax planning tool. If your estate is potentially liable for IHT, then a gift to charity can reduce the value of your estate and could reduce the amount of IHT your executors need to pay. Also, if you leave a minimum 10% of your estate to charity, then the rate of IHT could be reduced to 36%. The calculations to work this out are fiddly (it isn’t just a case of working out 10% of the whole thing!) and so it is worth discussing this with a solicitor who knows what they are doing to ensure your will has the clauses needed to make this effective.
Martha Swann is an Associate Solicitor in the Probate Team at Wilsons Solicitors LLP. She has been qualified for ten years and works in their Salisbury office. Martha grew up in Twickenham in south west London and studied Theology at Durham University before deciding on a career in law. She lives in Dorset with her husband and their two cats. In her spare time she enjoys cooking, countryside walks, sailing, mountain biking and is a bit of a Francophile.