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Wills & Probate

Independent Financial Advisors in Leeds - Richardson & Wise Finance.

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Richardson & Wise offer the following financial reasons to make a Will:

There are lots of good financial reasons for making a Will:

• You can decide how your assets are shared out – if you don’t make a Will, the law says who gets what.
• If you not married or in a civil partnership your partner will not inherit automatically.
• If you are divorced or if your civil partnership has been dissolved you can decide whether to leave anything to an ex-partner who is living with someone else.
• You can make sure you do not pay more Inheritance Tax than necessary.

If you do not have a Will there are rules for deciding who inherits your assets, depending on your personal circumstances.

If you are married or in a civil partnership and there are no children
The husband, wife or civil partner won’t automatically get everything although they will receive:

• personal items, such as household articles and cars, but nothing used for business purposes;
• £400,000 free of tax – or the whole estate if it was less than £400,000;
• half of the rest of the estate.

The other half of the rest of the estate will be shared by the following:

• surviving parents;
• if there are no surviving parents, any brothers and sisters (who shared the same two parents as the deceased) will get a share (or their children if they died while the deceased was still alive);
• if the deceased has none of the above, the husband, wife or registered civil partner will get everything.

If you are married or in a civil partnership and there were children
Your husband, wife or civil partner won’t automatically get everything, although they will receive:

• personal items, such as household articles and cars, but nothing for business purposes;
• £250,000 free of tax – or the whole of the estate if it was less than £250,000;
• a life interest in half of the rest of the estate (on his or her death this will pass to the children).

The rest of the estate will be shared by the children.

If you are partners but are not married or in a civil partnership
If you are not married or registered civil partners, you will not automatically get a share of your partner’s estate if they die without making a Will.

If they have not provided for you in some other way, your only option is to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975.

If there is no surviving spouse/civil partner
The estate is distributed as follows:

• to surviving children in equal shares (or to their children if they died while the deceased was still alive);
• if there are no children, to parents (equally, if both alive);
• if there are no surviving parents, to brothers and sisters (who shared the same two parents as the deceased), or to their children if they died while the deceased was still alive;
• if there are no brothers or sisters then to half brothers or sisters (or to their children if they died while the deceased was still alive);
• if none of the above then to grandparents (equally if more than one);
• if there are no grandparents to aunts and uncles (or their children if they died while the deceased was still alive);
• if none of the above then to grandparents (equally if more than one);
• if there are no grandparents to aunts and uncles (or their children if they died while the deceased was still alive);
• if none of the above, then to half uncles or aunts (or their children if they died while the deceased was still alive);
• to the Crown if there are none of the above.

It will take longer to sort out your affairs if you do not have a Will.  This could mean extra distress for your relatives and dependants until they can draw money from your estate.

If you feel you have not received reasonable financial provision

If you feel that you have not received reasonable financial provision from the estate, you may be able to make a claim under the Inheritance (Provision for Family and Dependents) Act 1975 – applicable in England and Wales.  To make a claim you must have a particular type of relationship with the deceased, such as child, spouse, civil partner, dependent or cohabitee.

Bear in mind that if you were living with the deceased as a partner but were not married or in a civil partnership, you will need to show that you have been ‘maintained either wholly or partly by the deceased’ – this can be difficult to prove if you have both contributed to your life together.

You need to make a claim within six months of the date of the Grant of Letters of Administration.

This is quite a complicated area and a claim may not succeed.

LIVING WILLS

The Government have recently indicated that they may give legal backing to the creation and use of so-called “living wills”, which are perhaps more accurately described as advance decisions on stopping life-prolonging treatment.

The current view of the courts is that, subject to a number of important limitations and conditions an advance refusal of treatment may be enforceable, provided it can be clearly established that the patient understood the result of refusing treatment, and was capable of making such a decision, and the decision applies to the treatment in question. 

Until such time as the Government do give statutory backing to Living Wills, thereby “legitimising” their use, they will remain under utilised.  However, if you would like to make a Living Will there are a few simple rules that you should follow:

• the document you create needs to be clear and concise;
• consider the types of treatment that you would not like to undergo and try to give your reasons;
• consider appointing a medical proxy, who can deal with decisions about medical care on your behalf;
• get the document witnessed by two people, who, preferably, will not benefit after your death;
• keep the original Living Will with your ordinary Will, but provide copies to your next of kin, the medical proxy and your doctor;
• the matter should be discussed with your GP.

Consult your solicitor about the wording of the document and ask them to store you original Will and Living Will together.  Keep copies for yourself and make sure your next of kin are aware of the existence of the documents and their whereabouts.

INHERITANCE TAX AND YOUR WILL

Inheritance Tax is the tax that is paid on your ‘estate’.  Broadly speaking this is everything you own at the time of your death, less what you owe.  It’s also sometimes payable on assets you may have given away during your lifetime.  Assets include things like property, possessions, money and investments.

Who pays Inheritance Tax?

Estates and lifetime gifts
Not everyone pay Inheritance Tax on death.  It only applies if the taxable value of your estate (including your share of any jointly owned assets and assets held in some types of trusts) when you die is above £325,000.  It is only payable on the excess above this nil rate band.

There are some important exemptions that allow you to legally pass your estate on to others – both before and after your death – without its being subject to Inheritance Tax.

Exempt beneficiaries
You can give things away to certain people and organisations without having to pay any Inheritance Tax. These gifts, which are exempt whether you make them during your lifetime or in your Will, include gifts to:

• your husband, wife or civil partner, even if you are legally separated (but not if have divorced or the civil partnership has dissolved), as long as you both have a permanent home in the UK;
• UK charities;
• some national institutions, including national museums, universities and the National Trust;
• UK political parties.

But, bear in mind that gifts to your unmarried partner or a partner with whom you have not formed a civil partnership are exempt.

Exempt gifts

Some gifts are exempt from Inheritance Tax because of the type of gift or the reason for making it.  These include:

• Wedding gifts/civil partnership ceremony gifts:
• parents can each give £5,000;
• grandparents and other relatives can each give £2,500;
• anyone else can give £1,000.

You have to make the gift on or shortly before the date of the wedding or civil partnership ceremony.  If it is called off and you still make the gift, this exemption will not apply.

• Small gifts
• You can make small gifts, up to the value of £250, to as many people as you like in any one tax year without them being liable for Inheritance Tax.
• But you cannot give a larger sum: £500, for example, and claim exemption for the first £250.  And you can’t use this exemption with any other exemption when giving to the same person. 
• Maintenance gifts
• You can also make Inheritance Tax-free maintenance payments to:
• your husband or wife;
• your ex-spouse or former civil partner;
• relatives who are dependent on you because of old age or infirmity;
• your children who are under 18 or in full-time education.

‘Potentially exempt transfers’
If you, as an individual, make a gift in any of the situations described below and it isn’t covered by one of the exemptions already described, it is known as a ‘potentially exempt transfer’ (PET).  A PET is only free of Inheritance Tax if you live for seven years after you make the gift.

Gifts that count as a PET are gifts that you, as an individual, make to:

• another individual;
• a trust for someone who is disabled;
• a bereaved minor’s trust where, as the beneficiary of an Interest In Possession (IIP) trust (with an immediate entitlement following the death of the person who set up the trust), you decide to give up the right to receive anything from that trust or that right comes to an end for any other reason during your lifetime.

Only ‘outright gifts’ count as PETs
If you make a gift with strings attached (technically know as a ‘gift with reservation of benefit’), it will still count as part of your estate, no matter how long you live after making it.  In some circumstances a gift with strings attached might give rise to an Income Tax charge on the donor based on the value of the benefit they retain.  In this case the donor can choose whether to pay the Income Tax or have the gift treated as a gift with reservation.