1 October 2014
The law on who inherits when you die changes dramatically on October 1, meaning that even those with existing wills ought to rethink the way they are drafted, says leading wealth manager Brewin Dolphin.
Without a will, so-called ‘common law’ partners will get nothing, while the children of married partners may find that they end up with less than expected.
“We often see clients with wills that are no longer suitable, so it is important to ensure yours is up to date,” says Nick Fitzgerald, Head of Financial Planning at Brewin. “If yours was made a long time ago or is obviously unsuitable, you may find that the money doesn’t go where you wish, while it is easier for family members to directly challenge your wishes. Without a relevant and up-to-date will, your relations could end up paying more tax, and your legacies may not go where you wish. You should revisit your will every three to five years, or when there is a material change to your life, but it is surprising how few people do this.”
Here are five of the top reasons your will might need a rethink:
1. You have named executors and guardians who are no longer suitable
Making a will allows you to choose an executor for your estate, who will manage its distribution in the event of your death. You can also choose guardians for dependent children. “Over 10 years there can be a landscape change – the friends you trusted are divorced, sick or too old to do the job,” Mr Fitzgerald says. “That can leave your representatives with all sorts of problems.”
2. Your will is not revoked after divorce
A will is revoked after marriage – but not divorce. “Many people getting divorced forget to make a new will, particularly because it is such an emotional time and they think they will get round to doing it later,” Mr Fitzgerald said “We advise clients who are in this position to update their will and, where necessary, change their expression of wish to their pension provider.”
3. Your will no longer fits your family
Families change over the years, with new members being born and marriages dissolving. If your will doesn’t include some of your grandchildren, or gives money to people who no longer need it, then some people may miss out.
4. Your will is no longer tax efficient
Unless you made your will after 2007, it may not reflect the current rules about inheritance tax. In 2007, the rules changed so that the nil-rate-band for inheritance tax was transferrable to a spouse. “Many wills set up before this point included discretionary trusts that are now unnecessary and expensive. We see loads of people who pay too much inheritance tax because they haven’t updated their wills in accordance with this change.”
5. Your will is too easy to challenge
Disputes over wills are difficult and distressing for everyone, so don’t leave even a smidgen of doubt over your wishes. “Up to date wills are more relevant and difficult to challenge,” Mr Fitzgerald said. “We see disputes particularly from aggressive in-laws if there is anything in a will that makes it look irrelevant or not in accordance with (their understanding) of last wishes.”
William Begley, partner at law firm Speechly Bircham, says that it is possible to rewrite your will so it is more flexible to changing future circumstances, and that you should consider this when redrafting. This could include adding a ‘Letter of Wishes’ to the will, explaining your decisions.
“While a will is legally binding, there are different types with varying amounts of flexibility which should mean you do not have to keep on changing it,” he said. “Indeed, many wills simply create the framework to enable you to specify with greater clarity, through a letter of wishes, how you would actually like your assets to be distributed after death. While a letter of wishes is not legally binding, it is much more flexible and allows circumstances at the time of your death to be taken into account.”
He added that a Letter of Wishes may make it harder for disgruntled family members to contest a will.
“There are certain well-trodden areas of dispute associated with wills which can be pre-empted to a certain extent when the document is first drawn up or updated. The most common issue we see is when children feel hard done by because they have been written out of a parent’s will, perhaps because they have generated considerable wealth of their own or there has been a family fallout. We generally try to encourage people to provide a clear explanation in the letter of wishes as to why they are not treating their children equally, if that is what they are determined to do.”
ENDS
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The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents.