Making a Will: Why bother?

In theory everybody would like to make sure that their loved ones are taken care of after they are no longer around to do so, and making a valid Will goes a long way to ensuring that this is the case. In practise, however, many people do not understand the importance of making a Will, or the practical implications of not doing so. Others may feel they are too young to make a Will, or simply never find the time. The result can be potentially devastating, particularly at a time when a grieving family has more important things to think about. Making a Will is the only way to ensure that your wishes are followed after your death. No Will equals no control…. Not an appealing thought!

When a person dies without making a valid Will they are deemed to have died intestate, and the rules governing intestacy are fairly inflexible. The outcome of their application is not always what people might expect, which can cause further upset. For example, most married people would assume that everything they own will go to their husband or wife when they die, but this is not what the rules say. Instead, as from February 2009, a spouse or civil partner is only entitled to the first £250,000.00 of the deceased’s estate, with the remainder being split into two equal shares. One share will go equally to any children once they attain the age of 18. The spouse of the deceased is entitled to the interest from the other share for the rest of their life, but that share is ultimately held on trust for the children.

This may not seem like too much of a problem on the face of it; however, there can be significant tax implications in this scenario. Upon death, every person’s estate can benefit from the ‘nil rate band’ (which is currently £325,000.00) and anything they own over this value will be liable for inheritance tax. However, any gifts made to a spouse upon death will benefit from the full spouse exemption for inheritance tax purposes, regardless of the size of the gift. As inheritance tax is charged at a rate 40% this equates to a significant saving. But if there is no Will, and the intestacy rules apply then the children’s share may attract a liability to tax. The more valuable the estate, the more tax has to be paid.

The rules also do not make allowances for varying personal circumstances:

  • Not all people get married and have children. In this instance the rules dictate that certain members of the family will benefit, dependant on who is living at the date of death. If all of your immediate family should die in your lifetime then distant relatives who you may not know could potentially benefit from your estate.
  • Alternatively, some people may spend their life with their partner but never marry. Again the partner would not be taken care of, even if that is obviously what the deceased person would have wanted.
  • Then there is the issue of separation. If a relationship breaks down but a divorce is not sought the surviving spouse would automatically inherit. If a Will is in place such unwanted outcomes can be avoided.

Another point to remember is that, while the contents of the Will are important, it is equally as important to ensure that the document is drafted correctly by a professional with the relevant expertise. If a Will is not drafted properly it may be held to be invalid, which will have the same effect as if the deceased had not left a Will at all . . . those intestacy rules again!

While this may all seem very theoretical, problems can and do frequently occur in real life. A recent example is the 2007 case involving Mr & Mrs Butler, which was reported in the Daily Telegraph on 27 May 2009. Two days before his death Mr Butler, a millionaire businessman, signed a Will leaving everything to his wife. However, the Will was not properly executed. A will must be witnessed by two people, but only one witness had countersigned the Will. Mr Butler was therefore deemed to have died intestate, the result being that the intestacy rules took effect, and Mrs Butler was only entitled to a £125,000.00 inheritance (remember that the statutory increase to £250,000.00 only came into force in February 2009!). The home that she had shared with her husband was subject to a £600,000.00 mortgage which she could not pay, and her inheritance was certainly not enough to buy a new home. In addition, as her children would ultimately inherit the rest of the 2.2 Million pound estate their share would be subject to 40% inheritance tax of approximately £880,000.00 all in all. Mrs Butler is now in the process of effectively taking proceedings against her own children as it is the only means she has of hopefully rectifying the situation. So not only has she had to deal with the loss of her spouse, but she is now being caused further upset by having to deal with the ‘red tape’ of the legal system as well.

The above scenarios certainly show how important it is to make a valid Will, and how detrimental not making one can be. Considering the relatively modest fees involved there really is no reason not to put your affairs in order. It is natural that you should want your property and assets to go to whoever you choose, and by making a Will you can ensure that the people you wish to benefit will do so. At the same time, you may save some tax!

If you would like to discuss making a Will please contact Rebecca Milburn on 0161 624 5614 in order to arrange an appointment.

Please note, references thourghout this article to spouse and marriage include and apply equally to civil partners and civil partnerships.

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