Why do I need to update my will?
If you've already made a will, then you've demonstrated your responsible attitude towards helping to ensure that your loved ones don't suffer any financial hardship as a result of your death, and could indeed benefit from their inheritance. However, wills which are never updated can cause as many complications and upset as if you'd never made one at all.
For example, perhaps you had one grandchild when you made your initial will and named that child as a beneficiary. Since that time however, the family has gone on to give you another four grandchildren. Unless you update your will to name those children as beneficiaries also, then they stand to lose out and one grandchild has therefore been singled out among all the rest, which may well cause a degree of bitterness.
Any significant changes in family structure, finances or the law which could affect how you've planned to distribute your estate, should act as a trigger for you to change your will.
The effects of a divorce can of course be far-reaching and devastating. When it comes to your will, if you have named your former spouse as an Executor, then this will no longer be valid and you will need to review the document again, to name a new Executor.
Similarly, should you marry or remarry, and want to include your new spouse or civil partner and any children or step-children in your will, then make sure that you review any existing will as soon as possible.
Family dynamics can in some instances be exceptionally complicated and emotionally fraught. In some cases, individuals may choose to change their will at the last moment, to omit a previously-included family member or to leave all their money instead to a friend, or charity. If you decide to do so, it is always advisable to either discuss the reasons for your amendment with all those concerned, or explain your actions in writing. In this way, no-one is left with unanswered questions, and the likelihood of subsequent probate contention is lessened.
Why do I need a life assurance policy?
A life assurance policy (otherwise known as "life insurance") will help your loved ones cope with the financial burden of your death. It differs from a funeral plan in that it can be used to cover debts other than those incurred by your burial or cremation – such as loans or any outstanding mortgage.
Life assurance policies are normally for a fixed term, paying out a lump sum in the event of your death whilst the policy is still active.
Not only will a policy help to pay off outstanding debts, however. It can also be used to support any dependents such as children or vulnerable adults by providing them with regular income, after your death.
There are many different types of plans to suit individual circumstances and financial objectives, including Term assurance, Whole of Life policies and Endowment policies. A professional estate planner will help to identify the most appropriate plan for your particular needs, dependent on who it is designed to support, your income and current state of health.
As a quick guide, Term assurance normally provides cover for a set period of time, with a lump sum payable, should you die within that period. Whole of life policies tend to be more expensive, but as the description suggests, will cover you throughout your entire life, so that a payout is definite at the time of your death. Life assurance may also be included as part of an endowment policy, meaning that you invest money regularly into the policy for a set term, until the savings can be made available to your dependents after this term, or in the event of your death, during the term.
Premiums are normally paid on a monthly basis to the plan provider, but you don't necessarily need to be employed full time. Part-timers, stay at home parents and self employed individuals may also take out a life assurance policy, provided they can pay the necessary monthly premiums.
Why put assets into trust?
Many of our clients ask why it would be beneficial for them to place assets in the form of money or property into a trust for their children or other loved ones.
In most cases that we handle, assets are put into trust to benefit children who have not yet reached an age dictated by our client. The trust is set up and managed by one or more trustees, who then have the legal obligation of handling the funds in the trust until such time as they are able to be made available to the beneficiaries.
There are several different types of trust to cater for specific circumstances and financial objectives:
Discretionary trust - a discretionary trust gives trustees absolute control over how the funds should be managed.
Interest in possession trust – an interest in possession trust can give the beneficiary an immediate income from the invested assets, although they will not have immediate access to those actual assets and may be required to pay income tax as usual.
Bare trust – the simplest trust to set up, a bare trust states that the beneficiary will receive specific assets when they reach a certain age.
Trust for a vulnerable person – of course, trusts are not only set up for children. Vulnerable adults may also benefit and this type of trust is perfect for them, particularly as the rate of income tax may be reduced.
Non-resident trust – on occasion, we meet with the added complication that all named trustees live outside the UK. In this instance, a non-resident trust may mean that income tax can be reduced or eliminated altogether.
In addition to providing additional funds for your loved ones, setting up a trust means that the amount you invest in the trust will subsequently be removed from the value of your overall estate, which often helps to reduce the amount of Inheritance Tax which may fall due in the event of your death.
Making gifts to reduce your estate – the rules
One of the most common ways of reducing inheritance tax liability is to make gifts to friends and family during your lifetime in the form of cash or assets.
There are specific rules which apply, which limit the amount you can give away which will affect your estate's inheritance tax liability.
You can legitimately give gifts with a value of up to £3,000 in total in each tax year, with this amount being exempt from inheritance tax. Should you not manage to give away the full £3,000 in a tax year, you can carry forward any unused part to the next tax year. However, it must then be used in that year or the exemption will become invalid.
In addition to this basic guideline, there are other allowable gifts which are exempt from inheritance tax.
For example, wedding or civil partnership gifts up to the value of £5000 may be given to the happy couple by each set of parents. Grandparents or great grandparents can give up to £2,500 and anyone else can give up to £1000.To qualify as a legitimate wedding gift, it has to be given either on the big day, or shortly before the ceremony takes place.
Gifts in the form of money or assets up to the value of £250 can be given to anyone in any tax year. This amount cannot be exceeded and this exemption cannot be used to give to the same person who has received other similar gifts from you in the same tax year for the purpose of inheritance tax reduction.
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Why making a will can reduce Inheritance Tax
Did you know that as a married person or civil partner, making a will can in actual fact help to reduce the amount of Inheritance Tax finally payable on your joint estate?
Each person's estate benefits from what is known as the "nil rate band". This simply means that assets belonging to the estate will only be taxed over the value of £325,000. Married persons or civil partners who have both prepared wills in advance with all assets going to the surviving individual can then also ensure that these assets qualify for exemption.
In addition, assets left entirely to the partner or spouse in this way, means that the deceased is not deemed to have used their nil rate band and it can be passed onto their other half, which could, in effect, double that person's nil rate band to £650,000 and ensuring that no inheritance tax will need to be paid on any assets under this value in the event of their death, even if they remarry.
Of course, if no will is made out then a deceased person's estate will be distributed according to the English laws of intestacy. This does not necessarily mean that all of their assets will automatically be passed onto the other spouse or partner but may instead be distributed among relatives. If this occurs, then their estate may not benefit from any exemptions or transfer of nil rate band – a potentially costly mistake.
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Scattering ashes – what you need to know
It may surprise you to learn that if your deceased loved one requested that you scatter their ashes rather than inter them, this may not be a difficult or complicated process.
On the whole, if you choose to scatter their ashes on your own private land, then you are perfectly entitled to do so, and there are no restrictions. It does become slightly more complicated however, if the land belongs to someone else or is a public area.
With regards to public areas such as parks, you should first approach your local authority for permission to carry out the scattering and if required, hold a small, private ceremony. Many authorities may be hesitant to give their permission, depending on each individual circumstance. Similarly with cemeteries and churchyards, prior permission should be sought from whomever owns the land, which is usually either the local authority or the church.
Be aware that you will also need the relevant permission to transport the deceased's ashes abroad.
A number of organisations will not allow scattering, due to the negative effects they say it has on the resident plant life. These organisations include The Forestry Commission and Royal Parks.
When the land belongs to a private owner, permission must be sought and it is worth bearing in mind that their family may enjoy spending time in the particular area that has been chosen. You are more likely to be allowed to scatter your loved one's ashes in a remote area, with only a small, private family ceremony to mark the occasion.
4 things to consider when choosing an executor
When choosing an executor, it is important that you take your time and consider your options carefully as your decision could have a significant effect on how well and fast your estate is distributed, and how much inheritance tax will be paid.
1. Should you have only the one executor or more than one?
Although many people prefer to keep it simple by naming only one executor, it can often be useful to have more than one, in case the individual dies before you do.
2. Do they have any specialist experience or skills?
Someone who is experienced in probate law, general law or finance will find it easier to handle the distribution of your estate when the time comes. For this reason, some people will nominate an organisation, as well as a loved one to be executors. However, a responsible, trusted person within your family is also ideal, particularly if they have some legal or financial knowledge.
3. Will they be happy to take on the responsibility of being an executor?
Without doubt, being an executor of an estate is a very responsible job and the individual can be held personally responsible if it is not carried out correctly and thoroughly, according to English law. It is therefore advisable to approach the person and ask whether they would be comfortable with being an executor, before you formally nominate them within your will.
4. Will they receive any reward for being an executor?
It’s easy and comfortable for us to choose someone responsible from within our family to act as our executor – particularly if they are a responsible person and/or have a relevant skill set which can be applied to the role of executor. However, if they are not also named as beneficiary in your will, this can prove a little awkward and may generate feelings of resentment. After all, acting as executor can mean endless phone calls to financial institutions, a great deal of paperwork and often a degree of investigation. Although it will be your final request, it does have enormous consequences and so it seems only fair that the person you nominate is compensated in some way.
Top 5 tips when preparing for end of life
Let's face it, all of us are painfully aware that we must die at some point in the future. Not all of us are aware of roughly when this will be, but for those of us who have sadly been forewarned that it will be imminent, it's more important than ever to be prepared, so that you don't leave behind a web of uncertainty, mistrust and tension.
Here are our top five tips for preparing for end of life. Whether you are aware that you have weeks or months left, or whether you simply like to have your life in order, then follow our checklist to ensure that you minimise any stress, distress and financial pressure for your loved ones left behind.
- Write a will - it's important that you outline not only who you want to benefit from your estate and who you want to be in control of distributing it, but what you want to happen after your death. Remember to include details such as whether you'd like to donate your organs, whether you want to be buried or cremated and any specific aspects of the funeral service.
- Consider taking out a funeral plan – with funeral costs now running into thousands of pounds, many families are facing the financial burden of having to find the funds to give their loved one a decent send-off. For some, this has meant taking out extra credit, sometimes landing themselves in debt. By paying into a funeral plan now, you are actively assisting your next of kin whilst you are still alive – allocating funds which will help to pay for your funeral.
- Choose your executor - being an executor is a responsible job and the individual can be held personally liable if your estate isn't distributed correctly. You can select an individual, a number of individuals or an organisation such as a bank to be your executor, but it's important that you choose someone who is sensible, reliable and preferably experienced in handling legal or financial matters. Discuss your request with them beforehand to ensure that they are happy to take on the role.
- Discuss the contents of your will with loved ones – all too often and on an increasingly frequent basis, cases are being brought before the court, disputing probate. Family circumstances may result in children being omitted from a will or you may decide to leave your assets to a friend or charitable organisation, rather than to your family. Save your family the anguish, confusion and substantial legal costs of such court cases, by explaining your decisions to them whilst you are still alive.
- Document your passwords and collate all paperwork – probate can become a lengthy and complicated process if a significant degree of detective work needs to be carried out by your executor. Why not save them time and effort by placing all your affairs in order and telling them where they can find all the documentation they will need relating to online bank accounts, statements and other financial details, after your death.
New English intestacy rules
The new English intestacy rules came into force on 1 October 2014 – but how do they affect you?
Well, if you are cohabiting with a partner, regardless of how long you've been a couple or whether you have children together, there is no change whatsoever and you run the risk of leaving your partner with absolutely nothing.
Married with children
If you are married with children, the law used to state that your spouse or civil partner would receive the first £250,000 of your estate. The children would be given half of the rest, with the other half being kept by the remaining spouse as "life interest", handed down to the children when that spouse died. Now, the spouse is entitled to £250,000 plus half of the remainder. The other half is automatically made available to the children once they turn 18.
Married without children
Where once the surviving spouse was entitled to £450,000 and half of the rest, with the other half going to blood relatives beginning with parents, the spouse will now receive the proceeds of the entire estate.
A loophole in the law, which used to indicate that children who were subsequently adopted after the death of one or both of their parents could potentially lose their inheritance, has been closed. This now means that they will receive their inheritance, even if they go on to be adopted by someone else.
As mentioned earlier, unmarried couples run the risk of leaving their partner without any inheritance whatsoever. If there are no children from the partnership, the deceased's entire estate goes to blood relatives – parents, siblings, nieces and nephews. If there are children however, the same rules apply, except the children will be first in line to receive the inheritance.
Although we always stress to all individuals the necessity of making a will, this is especially valid for couples who may have lived together for years and even had a family but never married. Please be aware that despite these new intestacy rules, if no will is in place then your partner will receive nothing in the event of your death.
Beware of cold calling funeral planners
It has been reported that there has recently been a spate of cold calls to unsuspecting consumers, by funeral planners selling financial plans to cover funeral costs.
A Somerset newspaper indicated that families within the town of Portishead had been targeted by these organisations both through the post and on the doorstep. What many don't realise however, is that there are strict terms and conditions attached to many such plans. In this instance, the plans are only valid, should the grieving family use specific funeral directors – not necessarily their local firm.
This smacks very much of a marketing referral scheme – certainly not appropriate given the stress and grief being experienced by loved ones during this time.
With average funeral costs now exceeding £3,500, it is wise to plan for the future. However, it is always best to do the homework beforehand and examine all terms and conditions very carefully. A reputable funeral planning agency will respectfully allow potential customers time to digest all the information, ensure that each aspect and restriction is understood and invite detailed questions, so that the customer can ensure that what is being discussed, is the right plan for their specific requirements.
A "sales approach" used by a firm selling funeral plans should always be viewed with a great deal of cynicism.