From the moment your baby comes into the world and takes its first breath, your life changes completely.
But consider for a moment what would happen if you or your partner were to die before your child reached his/her 18th birthday.
So the question arises, "Do I need a Will?"
You will be relieved to learn that it is not mandatory for people over the age of 18 to have a valid Will. However, if either or both parents die without leaving a Will they are said to die "Intestate".
As a result, all of your assets, including cash, bank accounts, building society accounts, stocks and shares, investments, annuities, insurances, property and all your personal effects may be distributed according to the intestacy rules in place at the time of your death and so your partner, friends and favourite charities may receive nothing.
Under the current intestacy rules the estate of an individual leaving a spouse or civil partner and children would be divided as follows: --
The surviving spouse or civil partner would receive all the personal effects, the first £250,000 worth of assets and a life interest in half the remaining assets. The children would be entitled to half the remaining assets on reaching 18 and the life interest assets on the death of the surviving spouse or civil partner. This could mean that the surviving spouse or civil partner would not be entitled as of right to the matrimonial home unless it was owned jointly as joint tenants. An unmarried partner would be entitled to nothing and might have to instigate litigation against the estate to obtain proper provision for him or her.
Not only will dying intestate add a considerable emotional burden to your loved ones, it may also make administering your estate much more complicated and expensive. For example, assets may not pass to those people you would wish to benefit; your spouse may receive less than is intended; if you are unmarried or not in a civil partnership, your partner will not inherit automatically under these rules. But by making a Will, you can decide how your assets are allocated and obtain expert advice so as to reduce or eliminate the Inheritance Tax burden.
Given the choice, most people would wish to ease the emotional burden on those left behind by setting out their wishes and deciding to whom and how their estate should be divided, rather than leaving it up to the Government.
Does this affect you?
If you have children, one of the main aims in writing a Will is to make provision for your children. If your children are under the age of 18, you can name one or more people to be guardians of your infant children in the event that both parents pass away before the children reach the age of 18. The guardian(s) should be people who could offer the best care and future security for the children, such as family members or friends.
Although it is not possible to prevent the awful tragedy of a child losing his/her parents, it is possible to incorporate provisions in the Will that plan for the future security of your children. These can be in the form of setting up a trust for your children under the terms of your Will and appointing Trustees to look after the estate monies until the children reach the age of inheritance you have set in your Will, such as 18, 21 or some older age.
The current UK tax regime states that Inheritance Tax is payable at the rate of 40% on assets in an estate in excess of £325,000, or in excess of £650,000 for married couples and couples living in a civil partnership, if they have a transferable nil rate band available to them. It should be noted that these exempt amounts may be less if the person dying has made any gifts in the last 7 years before death.
On the first death of a married couple or couple living in a civil partnership, in general all assets can be passed to the surviving member of the couple free of Inheritance Tax, but this is not the most tax efficient way to benefit the surviving spouse. There are special rules which apply when the surviving spouse is domiciled outside the UK.
If you are not married, or not living in a civil partnership, but instead are cohabiting, then there is no spousal exemption from Inheritance Tax. The law does not automatically recognise cohabitants as having the same rights as husbands, wives and civil partners. This could mean that all of your partner's assets worth more than £325,000 will be subject to tax at 40‰. Additionally, even if you have been living together for many years, your cohabitant may be left with nothing if you have not made a Will.
Therefore, if you are an unmarried cohabiting couple, you are advised to consider your inheritance tax position urgently, as the potential tax liability could be the biggest liability your family will face.
Making a Will is the only way you can guarantee that your assets will pass to the people you want to benefit.
If you want to ensure that full provisions are made for your spouse, children, or partner you are advised to speak to a solicitor specialising in Wills. The advice could cost much less than you think and you will have a professionally drafted Will dealing with all your concerns.
Simon A L Clark
Private Client Solicitor
If these matters affect you please contact a member of the private client department on 01483 302000 or email clive.barnard@www.rhw.co.uk
If you would like us to prepare a will for you, please complete our will questionnaire online.