We all know what a will is, don’t we? Or do we? It may seem like an obvious thing, but when Macmillan Cancer Support carried out a survey and discovered that 98 percent of people couldn’t accurately describe what a will is actually for, it may be time to think again. Although most people understand that a will is about ensuring that your beneficiaries receive what you want them to receive, there are other factors, and this is what was missing from most explanations.
Those other factors include the fact that having a will means that you won’t die ‘intestate’, which makes things very difficult for your family members, and makes probate a much longer drawn out thing than it really should be. It also doesn’t take into account the fact that a will needs to be updated after a re-marriage, or a divorce. It is a little more complicated than some people imagine, but this should not mean that you shouldn’t write a will – if anything, it means that writing a will simplifies things after you have died.
Macmillan’s survey also said that around 70 percent of people like to plan ahead, but that only 40 percent of the UK’s adult population had actually written their will. This is most likely due to the fact that people still find talking about – or even thinking about – death a taboo, or a frightening prospect, and therefore they put it off. Unfortunately, when writing a will is so important, and when there are many companies and people who are happy to help in such an endeavour, not writing a will causes far more problems than writing one would ever do. A short time of feeling uncomfortable thinking about your own mortality is far better than leaving confusion and bad feeling for your family after you pass away.
The misunderstandings that come with the idea of will writing include thinking that you have to be over a certain age (40 is the one that most cite) before you can write one. This is borne out with evidence that shows that 80 percent of 18-34 year olds don’t have a will compared to just 32 percent of those over 55. Another confusion is the cost of will writing. It is often assumed that will writing is a very expensive process, when in reality the cost of usually a lot less than people think.
But the problem comes when people think wills are solely about money. And those who have very little in savings or no assets therefore don’t think that a will is relevant to them, or their families. This is not the case, however. Wills are about more than who gets what. They can also set out what the deceased would like to have happen after their death, and this is especially important if children are involved.
Ian Workman killed his wife, Susan, mother of Ben and Nicholas, in April 2011, stabbing her in the heart with a large kitchen knife. The reason, it is claimed, was that she was in the process of divorcing the multi-millionaire car dealer, and the murder was committed in order to prevent Ian Workman from having to pay out in a large settlement. Susan would have been entitled to an equal share of everything.
For six years, Workman’s sons, and his sister-in-law, Carol Forrester, have battled the courts in order to obtain their share of the inheritance. Recently, three senior judges at the Court of Appeal agreed that the killer, who is currently serving life, would have to pay out just over £1.5 million, plus £500,000 costs.
Workman had originally refused to cooperate with the legal process. He had even forfeited the right to defend himself in court. On further investigation, it turned out that Workman had actually ‘voluntarily dissipated’ almost everything he owned to his eldest son, Grant.
This was seen to be an obstruction of justice, and did not do him any favours when it came to court. Ian Workman always claimed that he did not kill Susan for the money, but that instead it was done in self defence after she came at him during an argument. His sons, however, insist that their father should not profit from his crime – and the judges agreed.
The UK’s population is aging and increasing. That means that more and more people will eventually need residential care, and that can cost many hundreds of thousands of pounds. That can be taken out of someone’s savings and assets, and in turn that means that their children’s inheritance can be severely reduced.
Since care homes are means tested, if you have over £27,000 capital per annum, you will have to pay. For many, their initial thought is that they should hide their assets, or give them away as gifts so that they don’t get swallowed up in the care system. But is this the right thing to do if you want to protect your children’s inheritance?
There is really only one big ‘don’t’ when it comes to trying to prevent any inheritance from being swallowed up by the government and that’s don’t give your house to your children. It may sound like the ultimate solution, but it’s actually very bad news. It even has a name – the deprivation of wealth. Your local authority has the right to check over your financial records, and they will discover anything along the gifting lines. If the authority believe that you deliberately gifted the property to avoid paying fees, they can reverse the gift, and you will potentially lose it all.
As for the ‘dos’, one good idea is to become joint tenants. For married couples, the ownership details of a property can be changed so that rather than being join owners, you will be tenants in common. This means that within each person’s will they can leave their half of the property in trust to their children – and not to one another. This means that if one half of the couple dies, the other person can stay in the house. However, if they did need to go into a care home, only half of the property would be valued to be taken into account.
Another definite ‘do’ is to appoint a lasting power of attorney. An LPA is someone who is given the power to make decisions for you should you become unable to do so yourself. If you still jointly own your property when you need to go into care, but are unable to make any decisions for yourself, the LPA will be able to help your partner and the inheritance too.
Many of the UK’s biggest banks have limits on the amount of money that is allowed to be released from deceased customer’s accounts without the need to apply for probate first. However, these limits are set to increase for some banks.
Normally a bank or building society will freeze the accounts of someone who has died. This is in order to give the executor the time to apply for the grant of probate. However, this process can take a long time – sometimes months, and, in the case of incredibly complicated estates, years. The executor will be able to access money required to pay for any funeral expenses and inheritance tax that might be owed.
Some banks also allow small amounts of money to be withdrawn to give to bereaved relatives as long as a death certificate can be produced. Each bank is different, but in general, the amounts that were allowed to be withdrawn without probate would be between £15,000 and £20,000.
Recently, however, some high street banks and building societies have agreed to raise this limit. This will help those who are trying to wrap up their deceased relative’s estate and ease the burden at a difficult time. The Royal Bank of Scotland, for example, has raised its limit from £15,000 to £25,000. Lloyds Bank has raised its limit from £25,000 to £50,000. HSBC has removed its upper limit and has said that it will assess each case individually. Nationwide are looking at doing the same thing.
The raising – or removal – of these limits will mean that the estate can be dealt with much more quickly, and although probate will still be required for other assets, at least those left behind will be able to continue their lives without money being too much of an issue.
Are there really plans to bring in a ‘stealth tax’ that means probate fees could rise by up to 9,200%? It seems so. And this could bring additional hardship down on those who are already grieving and having to deal with the estate of their deceased loved one.
At the moment, probate fees are £215. This is a flat fee that is due on any estate worth more than £5,000. However, the new rates that are potentially being introduced could mean that the lowest probate tax that will be paid is £300, and this is on estates worth between £50,000 and £300,000. The rate is to be set at £20,000 for estates in the region of £2 million or more.
And although it may seem as though it is only the ‘rich’ who will have to pay such high costs, with rising property prices more and more people are being pushed into the higher bands. It is suggested that the government could raise over £250 million every year from these new tax rates, and the Department of Justice’s justification behind it is an increase in the administration behind probate since estates are often larger – and growing – and take more time to process. But is that £250 million going to go towards paying staff?
Despite the increase, it is estimated that 30,000 beneficiaries will not have to pay anything as they estates they inherit will be between £5,000 and £50,000. Under the current system they would have been liable for £215.
The new plans mean that there will be a 40% rise for estates between £50,000 and £300,000 (currently £215 this will rise to £300). For estates between £300,000 and £500,000 it is a 365% rise (£215 to £1,000). Estates between £500,000 and £1 million will see a 1,760% rise (£215 to £4,000). Estates between £1 million and £1.6 million will pay a 3,621% rise (£215 to £8,000). Between £1.6 million and £2 million it is a 5,481% rise (£215 to £12,000). And for anything over £2 million it is a 9,202% rise (£215 to £20,000).
The government in the UK has been undeniably busy of late, with plenty of upheavals to deal with – but that doesn’t mean that it hasn’t had the chance to take a new look at the many unclaimed assets and estates that occur each year when someone dies and there is no one to inherit the property, money, or possessions that belong to them.
A new body, the Independent Commission on Dormant Assets, has been set up and it is looking into where the ‘spare’ money should go, and how it should be apportioned.
The previous scheme was set up in 2008, and it was called the Dormant Bank and Building Society Accounts Act 2008. It meant that if, after 15 years, a bank or building society account had not been accessed, the money in it could be sent to good causes. The new scheme is about to be realised, and it differs from the 2008 one in a number of ways.
It is suggested that there is over £1 billion worth of ‘lost’ accounts in the UK – that includes savings, stocks, share, and bonds as well as pensions. This is after the Dormant Assets Scheme has already released £750 million, and passed on to various charities across the UK.
The new scheme seeks to make the process easier and quicker, ensuring that the money is sent to charities within the shortest possible time frame. But some are concerned that this means rushing through the process, and not allowing enough time for people to claim their money.
So how do these accounts become lost? It could be that family members have no clue as to the account’s existence once their loved one dies (not having a will is a major cause of this), and it therefore sits untouched for years. It also happens when the post is not redirected after a move, when a name is changed after a marriage, and when banks and building societies merge, or close down altogether.
The idea of a retirement village is a wonderful one. This is a place where, once you have bought your apartment or small house, you can move into a ‘village’ environment where there are care facilities and people on hand to help you in any way, but where you can also have your independence. These villages are extremely popular in America and Australia, and are becoming more the norm in the UK as well now.
They can make a real difference to the lives of those who choose to buy – or rent – their final home there.
But there can be issues for family members if the full details of the costs involved aren’t worked out in advance. This is because, although the cost of the retirement village seems fair, or even low, at the outset, there can be some major costs involved once the person who has bought or rented a home there has passed away or moved out for any reason.
And that cost will need to be met by the family.
The bill – typically known as an ‘exit fee’ – is usually capped at 10% of the purchase price of the property (which on average is £250,000, making the exit fee £25,000), although it can be much higher, and in some cases it can be as much as 30%.
It is important to understand exactly what these exit costs are, what they are for, and when they would need to be paid. Finding out the circumstances about all of these details is essential before signing up for any kind of long term commitment.
For some, however, this is the ideal solution. They may have a small income and therefore only want to commit to small outgoings, yet want to be able to enjoy the facilities of a retirement village. They can rely on their savings or property to be sold once they have died to pay for the outstanding amount.
There is no doubting that charities do wonderful things. They raise money for those causes that would otherwise generally go without, they bring attention to problems across the world and closer to home, and they do it all – for the most part – through donations from the general public.
And therefore it shouldn’t be a surprise to learn that a high number (around 46%) of people choose to leave a gift to charity in their wills. This is especially true if the charity has helped them or their family in some way, or when it is a cause that is very close to their hearts.
It is not as straightforward as it may seem, however, and there are certain issue and problems associated with leaving this kind of gift.
One issue comes with choosing a set amount of money to leave as a gift to charity. If, when you die, your estate is worth less than it might once have been – care home fees are a good example of how this can happen – then the set amount still stands. In some situations this can be the majority of the estate! Other beneficiaries could end up with much less than you intended as a result, and in some cases the estate may not even be able to cover the cost. A better way to include a charitable donation within your will is to use a percentage rather than a set amount. Even if the value of your estate goes down, the charity – as well as everyone else included – will still receive some money.
Another problem comes from the charities themselves. It is possible to check the probate service to ascertain whether you have been left any money, and charities do this a lot – they may then contact the family to discuss the matter, which of course can make a difficult and emotional time even worse. If you do not want something in your will to be made public then it is best to write a ‘letter of wishes’. This document is kept with the will but the details within it are kept private.
It is a good idea – as previously discussed – to talk about the contents of your will with your family. It can come as a shock to find out that some of their loved one’s estate is going to go to charity, and telling them beforehand, giving your reasons, will often soften the blow.
Charities disappear fairly regularly due to lack of funding, and this is especially true for the smaller ones. It is important to keep up with the news of your chosen charity so that, in the event that it ceases to exist, you can update your will. Otherwise it may be contested and will definitely lengthen probate.
Sometimes writing a will is just not enough. It’s a great start, and everyone should do it – immediately, there is no point waiting for something momentous to happen because life has a funny way of surprising us all, and not always in a good way – but simply writing your will and filing it away is not the end of the matter. Not always. And if you don’t tie up the final loose ends, studies suggest that your loved ones could lose out on almost £10,000.
This is due to not being able to find the assets listed within the will. Almost 40 percent of people who are named as beneficiaries have spent money (around £2,500) on solicitors in order to find missing assets which have been named in the will but aren’t immediately obvious, or which cannot be accessed – this could be because the deceased has forgotten to note down passwords and account numbers.
It can cost a lot of money to look for these lost assets, and there is no guarantee that they will be found. Therefore it is important to make sure that your loved ones will be able to find the information, and in some cases the assets themselves, they need in order to receive the bequest they were left.
Of course, it’s not a good idea to leave your online banking passwords and so on written down and left in a drawer with your will, but one way to do it that is not only secure but will make things easier and quicker after you have died is to note everything down, put it in a sealed envelope, and leave it with your solicitor until your will needs to be executed. Should the information change in the meantime, a new list of passwords etc will need to be handed across, but as long as it is all kept up to date, it will make the probate process much less hard than it otherwise would have been, and it will ensure your loved ones receive the assets you want them to.
Death isn’t something anyone particularly likes to think about; it’s not the most lovely of ideas to dwell on. And yet, it is inevitable. One way or another, we will all die, so although it is an unpleasant thought, it is something that must be discussed at least once – and that it when you write your will. Without a will, ensuring that your legacy is passed on in the way you want it to be will be almost impossible, and no will can also cause long lasting disputes and family feuds. Is that the legacy you want to leave behind? Is that how you want to be remembered, as the one whose death sparked an argument that broke a family apart?
That’s not a legacy anyone wants to leave.
Therefore, it is essential that everyone writes a will, to stop this kind of thing from happening.
We spend our entire lives building up a collection of possessions and money. We work for it, we strive for it, we sometimes make ourselves ill because of it. So making sure that it is all passed on in the way we want is the least we can do for ourselves and others.
Leaving the writing of a will until retirement can mean it is left too late. It is best to write one much earlier. Some people feel it is the right time to write a will when they have children, or buy a house, or get married. It is something big in their lives that means their death will directly affect others – a child, spouse, or the person who is left to look after the house. And with some people (a growing number) marrying twice or more, making a will becomes even more important. In order for children from all relationships to gain an equal share of the estate, a will has to be written, otherwise the intestacy rules could preclude some from what they are entitled to. Equally, if you are still legally married buy separated, and have moved on to a new relationship, it would, with no will, be your spouse who would inherit, even if you didn’t want them to.
Many people don’t write a will because they believe they have nothing to leave after they die. With fewer people owning their own house, that consideration isn’t thought of. But it’s not just about money and property. Finances don’t necessarily come into it, and anyway, the value of an estate could be much higher than anyone realises due to various bank accounts and other assets that haven’t been thought of in a little while.