Why make a will?
We are often told that we need a will, that to die without one would place financial and emotional strain on our loved ones. Yet, one in every three people in the UK never take the time to write one.
Your will is an invaluable opportunity for you to let your family know how you want your estate to be distributed. We believe it is simply too risky to leave it to the rules of intestacy to decide how your assets are shared.
The cost of making a will is far less than that of solicitors' advice regarding the distribution of your estate if you were to die without one. Having a valid will ensures that such complications and expenses are therefore avoided.
Home-made wills are fraught with problems and are often rejected by the Probate Registry, either because they have been incorrectly witnessed or because they do not dispense with the entire estate.
What happens if I do not have a will?
If you die without a will, or if the home-made will you have prepared is rejected, then you are considered to have died intestate. As such, your assets are subject to division by the Crown in accordance with the Administration of Estates Act 1925. Though the state has tried to make this as fair as possible, distribution under intestacy rules can create a less than desirable result.
Where would your assets go?
Here are five of the most common ways an estate is divided amongst heirs when somebody passes away with a will.
Let us answer your questions
Wills for foreign nationals
If you have assets in the UK, it is best to have a separate will to allow your family to access them more easily after your death. If you have a UK will, it is important to ensure that any foreign will is not revoked, unless of course, it is your intention to do so. The type of asset and the country where it is located can have a bearing on how it is dealt with in any will.
At Sable International, our clients are typically international citizens with global interests. This is at the forefront of our minds and the heart of what we do. We ensure that your UK will is drafted, taking into consideration all your assets, wherever they are situated.
Inheritance Tax and nil-rate allowance
Inheritance Tax is payable at 40% on the portion of your estate which exceeds £325,000. A will allows you to ensure that your assets are distributed in the most tax-efficient way. Since October 2007, it is possible for spouses and civil partners to transfer their nil-rate band.
Married couples and registered civil partners are able to pass assets to each other during their lifetime, or when they die, without having to pay Inheritance Tax. It does not matter how much they pass on – as long as the person receiving the assets has their permanent home in the UK. This is known as spouse or civil partner exemption.
If a spouse or civil partner leaves everything they own to their surviving spouse or civil partner in this way, it is exempt from Inheritance Tax. Furthermore, they will not have used any of their own nil-rate band. When the second spouse or civil partner dies, their estate can be worth up to £650,000 before Inheritance Tax becomes payable.
Charitable donations, business or agricultural tax relief
You may wish to consider making a donation to a registered charity of your choice to reduce the Inheritance Tax payable. Inheritance Tax is payable on all estates worth over £325,000 at the rate of 40%. However, from April 2012, if you leave 10% of your estate to a registered charity, the tax due may be paid at a reduced rate of 36%.
Business and agricultural assets may be allowed 100% Inheritance Tax relief. This can only be obtained with a carefully drafted will. Such exemptions are not available under intestacy rules.
Jointly owned property
Property can be jointly held in two ways – as joint tenants or as tenants in common. It is important to establish which way is the most suitable for you. If you own your property as joint tenants and one co-owner dies, the survivor automatically inherits the whole property. To avoid this, you can sever the joint tenancy, ensuring that the percentage share of each party is clearly documented.
Traditionally, assets and accounts such as bank statements, photos, music and book collections were all kept in the physical form, which could be clearly identified by executors. Today, many of us have online only accounts and information stored in "the cloud"; these are known as digital assets. A digital asset is one that requires a password and username.
Your executors have executive power and a duty to value your estate in its entirety. Therefore, any online investments and bank accounts also need to be included in the valuation and ultimate distribution of your estate. Photos held on social networking sites, digitally stored music and book collections may have monetary as well as sentimental value.
Your executors must have clear instructions as to where these accounts are held and how to access them. In some circumstances, you may wish that your social media accounts remain active for a period of time; in other circumstances, they may need to be closed down to prevent identity theft or ongoing activity.
A will becomes a public document, so details such as usernames and passwords should never be included. A personal asset log can be stored with your will as a separate document, with details of all digital assets. This will enable your executors to access all your assets if they need to.