There are no two ways about it: wills are incredibly important. But, worryingly, 60% of the population don’t have one.
It’s true, thinking about the inevitable isn’t easy, and talking about it can be even harder. The reality is, however, that failing to plan for what’s to come can have some pretty far-reaching consequences.
If you haven’t written a will (or you haven’t updated it in a while), maybe it’s time to pull off that mental plaster and get your affairs in order, before it’s too late.
Not convinced? Here are just some of the reasons why a will should be at the top of your ‘to dos’.
1. Peace of mind
Above all, making a will can provide enormous peace of mind.
It’s another mundane but important task ticked off — one that many of us file away for another day, but find we rarely get round to. But, more than that, it can also be a source of great comfort to know that anything you may have worked hard for will be looked after if and when the unthinkable happens. You can rest easy knowing that your wishes will be carried out exactly as you wanted them to be.
2. Keep control of your estate
In short, if you don’t leave a will (known as dying intestate) you have no say over how your estate is divided and who gets what.
Contrary to the common misconception, your estate isn’t automatically passed to your direct family members if you don’t have a will. Your money, property and possessions will be distributed according to the state and the complex rules of intestacy — i.e. who gets what is out of your family’s control.
On the other hand, if you make a will, you can divide your assets as you wish, and you’ll be able to choose your executor — the person who will be in charge of sorting out your affairs after you’ve passed.
Verbally expressing your wishes isn’t enough: a will is a legally binding document, and the only way to make sure your life’s work ends up in the right hands.
3. Limit your inheritance tax
‘Death tax’, as it’s known to some, ‘Britain’s most hated tax’ to others — whatever you call it, you could risk leaving your loved ones with an unnecessary inheritance tax bill if you fail to get your will sorted.
Inheritance tax (IHT) is a tax on the estate (property, money or assets) of someone who has recently died. If your estate is valued at £325,000 or less (or £650,000 for married couples and civil partners), there won’t be any inheritance tax to pay. This threshold is known as the Nil-Rate Band.
Anything over the £325,000/£650,000 threshold will be subject to a 40% inheritance tax charge that is to be paid to HMRC by your beneficiaries.
If part of your estate is your main home, you’ll also be eligible for the “Residence Nil-Rate Band” — an additional £150,000 (or £300,000) that can be passed on free of inheritance tax.
What does this mean in simple terms? Essentially, if you don’t take the necessary steps to distribute your estate in the most tax-efficient way (which can be done through a will) your loved ones could end up footing a not-so-attractive bill because you’ve breached your IHT allowances.
For example, you could specify in your will that you want to leave a certain amount to charity — if you leave over 10% of your total estate, your IHT liability is reduced from 40% to 36%. You could also have a deed of variation set out in your will, which would allow any beneficiaries to redistribute your estate when you pass away in order to limit IHT.
*Your own tax treatment will depend on your personal circumstances — remember that tax rules change regularly.
4. Look out for loved ones
Picture this — you’ve been in a relationship with your partner for over 30 years, living together in a home that you legally own. You’re unmarried and not in a civil partnership. If the unexpected were to happen, and you hadn’t left a will, your partner would be left with nothing; the home you shared together would instead be given to the state to decide what to do with.
And the devastating repercussions of not leaving a will can affect much more than your monetary assets — if you’re a parent and you haven’t named a legal guardian for your children in a will, they’ll be left in the care of the person the state chooses, not you.
5. Avoid family fallouts
A fifth of the population has fallen out with family over who inherits what after the death of a loved one.
Not writing a will means your assets will be divided up as the state sees fit — which can cause rifts if it doesn’t please everyone.
Aside from the monetary loss your dependants might experience, it’s sometimes the sentimental element that is the real kicker. Losing the family home or something that holds a lot of significance can be more upsetting than losing out financially.
And what people don’t often think about is the eye-watering legal fees that might ensue in going head-to-head with the state about the distribution of assets, or coming to blows with family members over a contested will.
Death can be a sensitive and painful thing to talk about with those closest to you. But however hard talking about it may be, you can bet that the repercussions of not talking about it will be much worse for those left behind.
Simply put, a will is the most effective way of protecting your assets and making sure your wishes are carried out exactly as you’d like them.
If you haven’t got one — make it a priority, before it’s too late.
Unsure how to put a will in place? We can help. Get in touch with one of our financial planners today.