Is it sensible to make a Will? Or, to put it another way, are there any benefits to be gained from making a Will? For many individuals, the answer to these questions must be “yes, definitely”. Why is this so?
First of all, making a Will ensures that your assets on death (often referred to as your “estate”) will pass to persons of your choosing, and in the case of children, at a suitable age as well, rather than according to the strict regime contained in the intestacy rules. For unmarried couples and same sex couples who are not in a civil partnership, a Will may be especially important since the intestacy rules make no provision at all for surviving partners to benefit.
Wills can also deal with the question of guardianship for young children and can provide important asset protection. They can often help minimise inheritance tax and may save your heirs considerable time, trouble and expense.
These principles are explained in more detail below. Please note that a same sex couple who have entered into “civil partnership” are essentially treated under the law in this area in the same way as married couples, and so references in this article to “spouse”, “married”, “married couple”, etc, apply in the same way to partners in a civil partnership.
Intestacy
An “intestacy” occurs when an individual dies without a Will or if the Will for any reason fails. If this happens, the deceased’s estate will normally pass according to the intestacy rules as follows.
If the deceased is married at the date of death:
- the surviving spouse obtains a limited entitlement only (unless the deceased’s estate is less than £250,000 in value, or where there are no children, £450,000 in value);
- half of any excess over £250,000 is immediately held for children (who will take their share at age 18);
- if there are no children, half of any excess over £450,000 will be held for parents of the deceased. If the parents are no longer alive, then the assets or monies are held for the brothers and sisters of the deceased.
If the deceased has no spouse, for example because of divorce, the estate passes directly to the children (at age 18). If there are no children, it passes to parents, or, if no longer alive, to brothers and sisters.
Wills and Marriage, Separation or Divorce
What happens to any Will you have made, if you later get married, or separate or get divorced? The law does intervene here, in some circumstances.
Firstly, the act of getting married will usually automatically revoke any existing Will. This means that the intestacy rules would normally apply unless a new Will has been made in the meantime.
The law does not affect an existing Will in the event of separation (here I am referring to the situation of a couple splitting up and ceasing to live together). So it may be appropriate to change an existing Will on separating from a spouse (and prior to any divorce) to ensure without delay that your estate would, in the event of death, pass to the desired beneficiaries.
The law does intervene in a number of ways when parties divorce. It provides that any bequest under a Will to a former spouse lapses (unless a contrary intention appears in the Will). It also means that the Will takes effect as if the appointment of a former spouse as executor or trustee were omitted. (The “executor” is the person or persons identified in the Will to act in winding up the deceased’s estate ie whose duty is to collect in all the assets, settle all liabilities (including any inheritance tax) and distribute the residue in accordance with the terms of the Will; the executor will often, though not always, be or include the spouse of the person making the Will. “Trustees” may also be appointed under the Will – often the same individuals as the executors – where the deceased’s Will directs that any assets are to be held “in trust” for one or more persons over any period of time, rather than distributed outright by the executors as soon as the residue mentioned above has been ascertained).
For the reasons outlined above, it is sensible to review any existing Will and it may be necessary to make a new Will in order to avoid the possibility of a total or partial intestacy or to fill any vacancy in the executorship.
Wills and Cohabitees
Cohabitees need to be alert to their status, or lack of it, in the eyes of the law as regards inheritance. I mentioned above that in the case of unmarried couples, and same sex couples not in a civil partnership, the intestacy rules do not recognise - and so don’t operate to provide any benefit for - the surviving partner. In the absence of a Will, the survivor may receive nothing.
The best answer to this is to ensure that Wills are made that do include suitable provision for the survivor. At the same time, cohabitees need to be aware that, if their relationship was subsequently to break down, it would be particularly important to review any such Will and consider whether changes are necessary. This is because, unlike in the case of a married couple who divorce – where, as we have seen, the law normally operates automatically to exclude a former spouse from any benefit under the other spouse’s Will – the ending of the relationship between cohabitees would have no effect on their existing Wills (unless specifically provided for in the Will itself).
Wills and Children
Where there are young children, it is important to ensure that the future care of the children is dealt with. A Will can provide for the appointment of a guardian or guardians to care for the children, and to exercise rights of “parental responsibility” up to the age of 18 (at which time children become legally independent of their parents), if there is no surviving parent to do so.
In the case of unmarried couples, the father will not necessarily have “parental responsibility” for the children (though he will do if registered as the child’s father on the birth certificate, for births registered on or after 1 December 2003). Where an unmarried father does not have parental responsibility, the mother’s appointment of a guardian by her Will would, technically, on her death vest parental responsibility in the guardian – though of course in practice the father might naturally assume such a role and in the unlikely case of any dispute, it would always be open to the father to seek a Court order granting him Parental Responsibility.
Asset protection
An additional potential benefit of writing a Will is that the Will can be tailored so as to protect the deceased’s assets for the longer term after their death. This is normally more relevant for those with more substantial wealth. But it can be relevant in the case of smaller estates too – for example if one is seeking to protect assets from potentially being swallowed up in future care home fees.
Accordingly, rather than gifting assets outright to a spouse or children, an individual making a Will (a “testator”) may want part of their estate at least to be held, following their death, in trust and under the ongoing control of trustees appointed by the Will. Such “trustees” would comprise or include persons familiar with the testator’s intentions as to how the estate should be managed following the testator’s death, and which individuals should benefit and when. The terms on which the estate is held “in trust” under the Will would of course invariably give power to the trustees to “advance capital” – that is, to transfer cash or other assets - out to the surviving spouse or children for their own use, if appropriate.
This means of asset protection might be relevant in a wide range of circumstances – one example is where the testator wants to provide for his or her surviving spouse, but nevertheless at the same time wishes to ensure that his or her estate (or part of it at least) will definitely be available to benefit children, or grandchildren, at the appropriate time in the future. If the Will left everything to the spouse outright, the testator could not be sure that these objectives would be achieved.
Inheritance tax
Normally the gift of assets by one spouse to the other under a Will is free of inheritance tax. But taking such an approach in drafting the Will may not be as tax efficient as it appears, and in one circumstance can be positively wasteful of the available reliefs.
Where asset protection, above, forms part of the strategy, that may also have an impact on the inheritance tax effect of the Will.
Jointly owned property
I should add, by way of caveat to much of the above, that where an asset is held in joint names (and what is sometimes the most significant asset, the family home, is usually in joint names), then on the death of one of the co-owners, his or her share in the asset will often – though by no means always – automatically (by law) vest in the survivor; such share in the asset is not therefore something which the deceased has power to give away by his or her Will. However, this automatic vesting in the survivor won’t apply if the asset is held (or arrangements can be made for it to be held) as “tenants in common” – in this case, the deceased is able to gift his or her share in the asset under his or her Will. This can be quite a complex area, and important not to overlook it.
Claims by Dependants
It is also worth noting that a testator’s freedom to decide who benefits financially under their Will is not completely unfettered.
The Inheritance (Provision for Family and Dependants) Act 1975 does empower the Court, in effect, to remake the testator’s will in certain circumstances. The Act enables the Court to order certain “reasonable financial provision” in favour of an
applicant, out of the deceased’s estate. The persons who have the right to apply to the Court include in particular the surviving spouse, certain cohabitees, and children.
On occasion, the fact that there is this Act, and the potential remedies under it, can be relevant to the way in which a Will is best written.
Will Preparation
The starting point in preparing a Will is to get a clear and complete summary of your relevant personal and financial circumstances. This will ensure any Will that is then drawn up can correctly reflect your intentions and also be effective in minimising any inheritance tax, both on the estate of the first spouse to die and on the death of the survivor.
Summary
How best to summarise the above?
Firstly, if you don’t have a Will, do think seriously about making one. I hope this article illustrates the range of benefits available from doing so.
Secondly, existing Wills should be reviewed periodically but in particular on or after any major life change, including:
- getting married or divorced, or becoming separated;
- entering into a long-term relationship (without being married), or the ending of such a relationship;
- the death of a spouse or close relatives;
- any significant change in financial circumstances.