Making a Will
Most of us put off making a will but it really is the best way have a lasting legacy after you've gone. If you don't make a Will, your family will not automatically benefit from what you leave behind. Making a Will ensures your wishes are carried out and is also an excellent way to help small Charities like Proclaim Trust. Take a few moments to read the notes below on the benefits of making a will.
1. Why should I make a will?
Making a will is the only way you can be sure that your wishes will be followed after you die. If you don't make one, part or all of your estate may go to people who you never intended to benefit. Not only that, Inheritance Tax legislation means that, if you don't prepare properly, a substantial part of what you leave behind may go to the State. Thankfully it is easy, quick and inexpensive to have a will drafted by a properly qualified professional.
2. What about home-made wills?
Home-made wills can be disastrous. You may omit particularly important details, such as what you wish to happen if the main beneficiary does not survive. It's always worth talking to a professional to make sure everything you need to cover is included in your will.
3. What should I consider when writing a will?
Wills aren't solely about passing on your assets. You can also include specific funeral arrangements: for instance, burial, cremation or the use of your body for medical research. You may also want to appoint legal guardians to care for your children if you and your partner should die before they are 18. One other important consideration is the appointment of your Executors - the people who will deal with your estate in the event of your death. Ideally, these should be business-minded family or friends or professional advisers. Three is an ideal number - for instance, two family members and a professional.
4. What else can I include in my will?
You may choose to use your will to pass on business interests: for instance, you could leave shares in the family company to a son or daughter who has come into the business. This is a very tax-efficient way to leave assets to your intended beneficiaries. Personal items like jewellery, paintings and heirlooms can also be covered in a will, as can any gifts you wish to make to charity.
5. Can I leave money to my favourite charity or cause in my will?
Yes. In fact many people who give to charity choose to leave something behind to their favourite cause or causes when they pass away. Not only does this create a fitting legacy, it also passes on some excellent tax advantages to the charity receiving it. Indeed, legacies from committed supporters make up a very important income stream for many charities. If you do want to leave something to a charity, the donation can be as small or as large as you like. However much you decide to give, you can rest assured that the charity will not have to pay any Inheritance Tax on the donation. On the other hand, you may wish to leave assets to a charity by setting up a Trust. Similar tax advantages apply, and you can also arrange for a charity to start benefiting from your donation before you die. If you feel that it would be appropriate to leave a charitable donation in your will, your solicitor will be able to advise you on what exactly is best suited to your circumstances.
6. What are the tax advantages in writing a will?
Under current legislation, if the estate you leave behind is less than £263,000 (the 'nil-rate' band) your beneficiaries will not have to pay Inheritance Tax. However, if you leave an estate worth more than £263,000, they will have to pay Inheritance Tax of 40% on anything beyond the nil-rate band. This is applicable on all your assets, including your house. So, for instance, if you leave an estate consisting of a house worth £300,000 and a further £100,000 of other assets, your beneficiaries will have to pay 40% of the amount over the nil-rate band, which works out at £58,400.One way to avoid this is to leave your assets to your spouse, as they will be exempt from Inheritance Tax. However, this does not apply to couples living as 'partners' rather than married couples.
Also, once your spouse dies, there can be no such exemption and his or her whole estate will be eligible for Inheritance Tax. A more effective way to limit Inheritance Tax is for you and your spouse to make the most of your nil-rate bands and set up a 'Discretionary Trust' in your will. Your solicitor will be able to give you more details about how to do this. Of course, another way to limit your estate's exposure to Inheritance Tax is to make a donation to charity - which will be totally free of tax.
7. What happens if my circumstances change?
It's important to review your will regularly - at least once every five years. After all, life never stands still. Your family circumstances may change, as may the relevant taxation laws.
Enduring Power of Attorney
8. Is there anything else I need to consider?
Once you have made a will you'll be able to enjoy the reassurance of knowing that your affairs will be taken care of after your death. But did you know you can also set up an arrangement to look after things if you become incapable during your lifetime? This is known as an 'Enduring Power of Attorney.'
9. How does an Enduring Power of Attorney work?
To ensure that your affairs will always be taken care of, you can appoint an attorney to safeguard your interests and act on your behalf if necessary. You are entitled to appoint more than one attorney to act together or separately. If you ever do begin to lose your mental capacity your attorney applies to the Court of Protection and registers the Enduring Power of Attorney and they then take over the management of your affairs. Your attorney is always subject to the Court of Protection's jurisdiction.
10. What should I do now?
If you are making a will or setting up a Trust it's worth speaking to your solicitor about your plans in detail. Everyone's circumstances are different, and your solicitor will be able to advise on the best options available to you. Please don't forget to consider leaving a donation to Proclaim Trust. Donations in wills prove invaluable to charities like Proclaim Trust, helping us to fulfil our vision and transform lives. You could leave a lasting mark on the world by preparing now.
If you have any questions about donating to Proclaim Trust, please contact us.