Many people wrongly believe that their whole estate will pass to their spouse or civil partner upon their death. However, this will only apply if a correctly drawn up Will makes such provision.
Consider Mr & Mrs Stephens and their 2 children. Upon Mr Stephens’ death, without a will, Mrs Stephens will not inherit all of Mr Stephens’ assets. Instead she will receive everything up to £450,000 and his personal possessions. Any balance of his estate is divided and half passes to the children at 18 or earlier marriage. The remaining half is held in trust during Mrs Stephens’ lifetime - she will get any income. On Mrs Stephens’ death this half will then go to the children.
A will is a legal document which clearly identifies what is to happen upon the testator’s death. It is possible to identify specific gifts within the will or alternatively ensure that the whole estate passes to a particular beneficiary.
Not only does a will deal with distributing assets but also a number of other aspects:-
- It appoints your executors; these are people who you wish to act on your behalf after your death. The executors deal with obtaining a grant of probate, collecting in assets and distributing according to the provisions of the will.
- If you have children it is important to make it clear who you wish to care for them in the event of your death and therefore it is also important to appoint Guardians in your will.
- You may have strong views on funeral wishes and this is another aspect that is dealt with by a will.
- It is also possible to set out trusts in your will which will become effective upon death. Prior to 9 October 2007, trusts were often used as a means of tax planning by utilising both spouses' nil-rate band (NRB). Since the introduction of the transferable NRB this form of planning is not quite so common but it is still an effective tool for a number of reasons. (Please refer to the article entitled “Nil-rate band discretionary trusts – still an effective tool in estate planning” for further information.)
If a person dies without having made a will, then they are said to have died “intestate”. In such a case a variety of problems can arise:-
- Assets may be distributed to individuals accordingly to the intestacy rules rather than to those chosen by the deceased. (Please refer to the article "Rules of intestacy" for further information.)
- Possible delays in the settling of a deceased’s affairs may occur, which could prove distressing to family members as well as the potential for increased time being spent administering the estate which may prove costly.
- An avoidable inheritance tax bill may arise.
It is important to remember, however, that despite setting up a will, circumstances may arise which will mean that a will needs to be updated. It is a general rule that marriage or a civil partnership automatically revokes a will and therefore without creating a new will death would result in intestacy applying. However, if it appears from the will that the testator was expecting to form a civil partnership, or to marry then the Will is not revoked. Divorce also impacts the terms of a will and a new baby for example may mean that a new will needs to be drafted.