When you Should Change Your Will….

There are many reasons why you may need to change your Will after you have made it.

Marriage, Separation, Divorce & Re-marriage:

The most obvious is a change of your family circumstances and, especially, your marital situation. If you marry, separate, divorce or re-marry, you should certainly make a new Will for the following reasons:

• Your spouse does not necessarily stand to inherit everything you own unless you have made your wishes clear in your Will.
• If you are separated from your spouse, and living with another partner, your new partner is normally entitled to nothing unless they have been specifically named in your Will.
• If you are separated from your spouse and no divorce or annulment has taken place, they will still have a legal claim on what you own unless you make a new Will – however long the separation has lasted – but with a Will a successful claim is less likely. A former spouse is always able to make a claim against your estate following your death but only in certain circumstances will such an action succeed.
• If you make provision in your Will for your spouse but later get divorced, that provision will not be carried out. If you want to make provision for a former spouse, you must make a new Will.
• Marriage normally revokes a Will (the only exception being when a Will is made in anticipation of a marriage) so if you marry for the first time, or divorce and re-marry, any Will you have previously made will normally be null and void.
  

What are “gifts”:

If you are married and own assets jointly, your personal effects such as a car, furniture, pictures and books will automatically go to the survivor unless you direct otherwise in your Will. However, if you want particular possessions to go elsewhere, you should give an “exact” description of them so that they can be specifically mentioned in your Will.

Disposing of the ”Residue”:

When all the debts, funeral expenses, legacies and individual gifts have been deducted from your estate, there may still be some money left over. This is called the “residue”

Keeping Your Will Up To Date:

Even if there has been no change in your marital status it makes sense to take a fresh look at your Will every few years. Ask yourself the following questions:

• Are my assets worth considerably more (or less) than when I made my Will?
• Does my Will reflect the current value of my property and possessions?
• Does my Will still meet my wishes?
• Should some of the bequests be altered to take into account changes such as the death of a beneficiary or the birth of any children in my family?
• Are there any people or organisations not mentioned in my Will whom I now wish to benefit?
• Can I, by changing my Will, reduce the amount of Inheritance Tax that will have to be paid on my estate?

How to Change your Will:

The simplest way to make relatively minor alterations or additions to your Will is by making a Codicil. This is an instruction which is added to the existing provisions of your Will, and you can alter the Will in any way you wish. You should decide on the changes you wish to make and then draw up a Codicil.

When to Make a New Will:

If there are any significant changes in your circumstances or wishes, you would be best advised to make a completely new Will. This certainly applies if there has been a change in your marital status, or a significant change in the value of your assets.

Appointing an Executor/Trustee:

It also makes sense to appoint two executors/trustees in case one is unable to act for you. You will need two trustees if you wish to set up a trust. It is the Executor’s job to make sure that your wishes are carried out. As he or she is responsible for administrating your estate, it should be someone you trust. Your spouse is an obvious choice – the executor can also be a beneficiary of your Will. Alternatively, you may wish to appoint a professional who will charge a fee, which can be deducted from the value of the estate.

How to Keep Tax to a Minimum…:

At the time of your death, the total value of all your assets is calculated for Inheritance Tax purposes. If the total net value comes to more than the tax threshold, your estate will be liable to pay Inheritance Tax at the current rate.

The tax threshold and the rate of Inheritance Tax are fixed in the Chancellor of the Exchequer’s annual Budget and are liable to change each year. Consequently, Inheritance Tax is a real danger, even to those with modest means taking into consideration the value of their property. The Inheritance Tax bill can come as quite a shock to your heirs. You can calculate your liability by adding up your assets, including the value of your property, insurance policies, death in service benefits etc, deduct the current nil rate band tax threshold and the net figure remaining will be the one that is taxed at 40%.

Happily, there is no tax on wealth which is passed between a husband and wife. But leaving everything to your spouse will only delay paying Inheritance Tax until the second death. If you have substantial assets apart from your house, you should consider leaving what you can to your children or other beneficiaries – that way you can make full use of the current allowance on your death and a further allowance on the death of your spouse.

If you do not wish to commit yourself to giving away the allowance at the time of the first death of a married couple, there is another way to maximise tax benefits. A Discretionary Will trust can be available to support the surviving spouse, if necessary, without Inheritance Tax being payable on it when he/she dies.

It is not so easy if your main asset is your house. Even if you give it away but continue to live in it, it will still be taxed as if you own it when you die. This is known as a ‘Gift with Reservation’.

There are ways of reducing your tax liability and ensuring that as little as possible of your hard earned wealth goes to the taxman.

Life Assurance:
Death benefits from life assurance policies can be made free from Inheritance Tax. Therefore, arranging a policy which pays out to a named beneficiary after your death can be a good way of reducing tax liability.

Making Gifts in Your Lifetime:
No Inheritance Tax has to be paid on outright gifts which you make more than seven years before you die. And, if the gift is to charity, no tax has to be paid even if it is within seven years. If you are hesitant about making an outright gift to an individual you can always make the gift into a Trust, discretionary or otherwise. Furthermore, you can give capital away up to £3,000 a year – every year – per person, without it counting in your estate at all, irrespective of when you die. If you made no gifts last year, you will be allowed to give £6,000 away this year. These limits apply separately to married couples, so if you have joint savings you can each make gifts of £6,000 – that’s a total of £12,000 which could go to your children now and escape the clutches of the taxman.

Leaving a Legacy to Charity:
Many people support charities during their lifetime. A legacy to a registered charity is free from Inheritance Tax. Leaving a gift to a favoured charity in your Will not only helps a good cause but also normally reduces your Inheritance Tax liability, because any legacies to charities are deducted from the value of your estate prior to taxation.

For example, if your estate is worth £10,000 more than the tax threshold and, assuming Inheritance Tax is at 40% (the current rate) at the time of your death, there would be Inheritance Tax of £4,000 (40%) to be paid out of the estate.

However if you make a cash legacy to a charity of £10,000 the notional value of your estate would be reduced by that amount and there would be no tax to pay.

Gifts for the Public Benefit:
Gifts or legacies to certain other organisations, which may not be charities, can also qualify for tax exemption. These are organisations which are deemed to be for the public benefit, such as the National Gallery or the British Museum.

Inheritance Tax:
In the 2007 budget the threshold for Inheritance Tax was raised to £300,000. This takes effect from 6th April 2007. In the same budget, the rate of Inheritance Tax was re-affirmed at 40%. You should take these figures into account when estimating how much tax your family is likely to have to pay on what you leave.

For example, under the present rules, if the total value of your home, property and all your assets is £312,000, your family would be liable to pay £4,800 in Inheritance Tax, being 40% of the taxable amount of £12,000. If you left £10,000 to any registered charity, the taxable amount would only be £2,000 and the tax payable would be £800.

Why Making A Will Is So Important:

Making a Will is NOT JUST FOR THE ELDERLY. If you have young children, you need to appoint guardians otherwise your children may not be cared for by those you assume will do so. Your wishes would be taken into account in any future court proceedings.

In 1999, 262,523 people in this country died leaving an estate worth £5,000 or more. Of these, approximately 20% left no Will. Many of them left their loved ones with legal problems that took months or even years to resolve.

Making a Will is the best way you can be sure of what will happen to your property and possessions after your death.

If you are married – and, especially, if you have young children – it is the best way of making absolutely sure that they are provided for.

Even if you have no family, you will still want to ensure that your possessions go where you wish– perhaps to friends or to charities you supported during your lifetime.

Married Couples:
Many married people assume that when they die everything will pass automatically to their spouse. This need not be the case. Sadly, it is a misunderstanding that can cause serious hardship to the wife or husband who is left behind. Only if you have no living relatives will your spouse automatically get everything. Without a Will, the law decides how your possessions should be divided and if there are children or other close living relatives – even cousins– they may have a claim on the property of the deceased. This can result in a widow having to sell the family home because other relatives are entitled to a share in the value.

What’s more, the question of “who gets what” can lead to complicated legal disputes. The surviving spouse may have to wait months or even years for the whole tangle to be sorted out – and this could result in expensive legal fees.

None of this need happen if you make a proper Will. Through your Will you can make it plain what your wishes are. If you want all your possessions to go to your wife or husband, you can say so clearly. To leave no room for doubt, and to make things easier when one of you dies, you and your spouse should each make your own separate Will.

Unmarried Couples:
If no Will has been made the law is even harder on the surviving partner. Whether or not there is a Will, in many cases the surviving partner will have no claim on the estate of the first to die unless financial dependency is proved.

Providing for Children:
If you have children, your Will is the only sure way of providing for them after your death. This is especially important for young children.

It is not just a matter of what will happen if you die. You also need to consider how your children will be looked after if both parents die while they are still young.

Through your Will, you can provide for their financial future. You can also nominate guardians who will be responsible for the children if they lose both their parents, otherwise they may have to go into local authority care until ‘suitable’ homes can be found for them.

Other People You May Wish to Help:
There may be other people whom you want to remember in your Will. Only by making a Will can you be sure that a friend or relative will receive the particular piece of furniture or jewellery – or sum of money – that you would like them to have after your death.

What If You Have No Immediate Family?
Even if you have no relatives you want to provide for, it is still important to leave a Will. If you die without making a Will and you have no family, everything you leave behind will go to the Government, and any opportunity for helping friends, charities or organisations will have been lost.

Witnesses:
Once the Will has been drawn up it needs to be properly signed and witnessed. Two witnesses are needed and all three of them have to sign in each other’s presence. If any witness, or their spouse, would have benefited from the Will, then that gift will fail.

Where to Keep Your Will:
Most people ask their Legal Advisor or Bank to look after their Will once they have made it. If you would rather not do this, make sure you keep it in a safe place – and that someone close to you will know where to find it after your death. You may have to pay storage charges. You can however store it at the Probate Court in London for which there is a single one off charge, currently £15.00. You will need to remember to secure any further will or codicil in the same manner and a certificate will be provided which can be placed with a copy of your will or provided to your executors. This will avoid the possibility of another “home made” Will being drawn up by someone who may be coercing you to redirect your assets when perhaps you may not be in full charge of your faculties and are vunerable to undue influences.

It is not expensive to make a Will:

The cost can be as low as £75.00 per will, nor need it be complicated or time-consuming. A well-drawn Will can often save a lot of tax BUT please note that if Inheritance Tax advice is given then costs will be higher.

It is very important that you do the job properly. A homemade Will is quite often not worth the paper it is written on.

Legal Language Explained:

When you make or change a Will, there will always be one or two unfamiliar words or expressions which may need explaining. To make things clearer, listed below are some of the more important legal terms along with short explanations.

Administrators:
People appointed to sort out your affairs according to the law if you leave no Will.

Beneficiary or Legatee:
The individual(s) or organisation(s) who are to receive something from your Will.

Codicil:
A change or addition made to an existing Will.

Crown or Treasury:
The taxman. If you leave no Will and have no relatives, the Crown or Treasury will receive all your possessions.

Chattels & Movables:
All your personal possessions: car, furniture, jewellery etc.

Estate:
Everything you own at the time of your death.

Executor:
The person appointed by you, in your Will, to look after your affairs and ensure that all of your wishes are carried out.

Intestate & Intestacy:
This is the term used to describe the situation when a person dies without leaving a Will, or who leaves one that is invalid or incomplete.

Legacy:
A specific item or sum of money given by a Will or Codicil.

Probate:
The document granted by the Probate Registry following proof of a Will by an Executor.

Letters of Administration:
The document granted by The Probate Registry when no Will is left and someone applies to ‘administer’ the estate.

Residue:
The gift to a person(s) or organisation(s) of what is left from your estate when all debts, tax, legacies and fees have been deducted.

Testator or Testatrix:
The male/female making the Will – you.

Trust / Discretionary Trust:
When all or part of your assets are left in the hands of Trustees. They are responsible for administering it for the good of the beneficiaries – usually children.

Trustee:
The word for an Executor who has to look after any part of your estate that you leave under a trust.