Where there is a Will there is a way!
Graeme Black, Director and Head of the Wills and Probate Department at Bonnetts, gave a talk at Metro Bank in Staines on the 2nd November 2017 regarding the importance of having a Will. I was also in attendance along with another solicitor in our department, Lorna Greening.
This was the second event we have hosted with Metro Bank and it is great to work with a forward thinking modern bank who match our ethos as a firm. We were honoured that the Mayor of Spelthorne, Vivienne Leighton, attended the event and she gave an interesting insight into the history of Staines to commence the evening.
Graeme then began his talk and firstly explained what a Will is, before covering the key points as to why you should have a Will, some examples of which are below:
- You choose your own Executors who you trust to administer your estate;
- If you have children under the age of 18 you can choose guardians to bring these children up in the event that you die and they are under the age of 18;
- You can include legacies such as "my Rolex watch to..." or £1000 to....";
- You decide who you would like your estate to go to and you are not dictated to by the intestacy rules;
- You are able to make a Will which is inheritance tax efficient;
- You can choose at what age you would like beneficiaries to inherit. If you die without a Will, beneficiaries will inherit at the legal age of 18 which you make think is too young; and
- You can include trusts to protect vulnerable beneficiaries.
One of the key discussion points was around what happens to your estate if you die without a Will and how this affects your inheritance tax position.
The intestacy rules dictate, by law, where your estate passes to on death when you do not have a Will. It is quite common for people to believe if they are married and have children, that everything will pass to the spouse when the first of them dies but this is not necessarily true.
If you are married and have children and die without a Will, £250,000 passes to the spouse, along with all their personal possessions and the rest of your estate is divided into two equal shares, 50% passing to the spouse and 50% passing to the children.
Before looking at the inheritance tax consequences, you can see from this example that the spouse will not be inheriting your whole estate which means that if the property is solely owned by the deceased , or with the spouse as tenants in common, this may have to be sold to provide the children with their share of the estate. Furthermore, if the children are under the age of 18, part of the estate will be held in trust which could be money that the surviving spouse needs.
Turning to the inheritance tax consequences of this scenario, everyone has a nil rate band of £325,000 which is free of inheritance tax and everything above this amount is taxed at 40%. However, if the estate passes to a UK domiciled spouse, whatever the amount, it is exempt from inheritance tax. Therefore, if the amount of your estate passing to children is above £325,000 there will be inheritance tax to pay when the first spouse dies, unless there are any other inheritance tax allowances which could be available such as the main residence nil rate band.
This also affects the inheritance tax position when the second spouse dies because you might not have a full transferable nil rate band available. The transferable nil rate band is where you apply for the inheritance tax allowance of the spouse who dies first but the full £325,000 is only available if the first spouse who dies, passes everything to the second spouse. In this scenario, the transferable nil rate band is reduced by any amount passing to the children on the first death, meaning there will be more inheritance tax to pay when the second spouse dies. This can be prevented by drafting a Will which is tax efficient.
Other examples of why you would want a Will in place rather than allow the intestacy rules to dictate where your estate goes, is where you have a partner but you are not married as they will not receive anything under the intestacy rules. Furthermore, if you are unmarried and do not have children, it will be your parents who inherit first and they maybe elderly, already have a large estate or be in care.
Another lively discussion point was around “do it yourself Wills” and Wills not prepared by solicitors. Graeme, myself and Lorna all gave examples of where Wills not prepared by solicitors have caused issues on their death because of poor drafting which means clauses are not effective and their intentions are not clear. It was agreed amongst all that seeing your friendly solicitor was the best way to ensure you have an effectively drafted Will!
After Graeme’s talk we engaged in conversation with people in the room whilst enjoying the nibbles and drinks provided by Metro Bank. It was great to see everyone digesting just how important it is to have a Will.
The event was a great success, with questions being directed at Graeme throughout the evening which made for a lively and passionate discussion about Will planning which is something, I did not ever believe I would say!
If you need a Will or would like us to review a Will for you, please do not hesitate to contact a member of the Wills & Probate Department.