Legacy, Wills and Planning

Legacy planning is something many people neglect to focus on before it's too late, yet it’s vital to ensuring the assets you’ve accumulated benefit your loved ones as per your wishes.

A will is a legal document that allows you to put on record what you want to happen to your estate after you die. Without one, the process of sorting out your assets can be more stressful and time-consuming for your loved ones, and your inheritance might not go to who you want. A will can also ensure your estate is inherited in the most tax efficient way, protecting your legacy.

If your spouse, children or anyone else depend on you financially, a will is especially important, and even more so if there are difficult family relationships which could be inflamed by someone laying claim to something in your inheritance.

A will is also crucial if you wish to leave anything to anybody other than family members. For instance, you may wish to leave money to your favourite charity, which is also a good way to reduce your inheritance tax liability. You can even specify how the charity should use the money, though it's wise to discuss your wishes with the charity because there are instances where charities have to refuse gifts because they can’t comply with the conditions attached.

Despite the vital function that a will serves, half of UK adults don’t have one, according to a study by Canada Life. This includes a third of over-55s.

Importance of a Will to your Legacy

When someone dies without a legally valid will, the rules of intestacy decide how the estate will be shared out. These rules, set out in law in England and Wales, with separate rules in Scotland, are very black and white and no consideration is given to what your wishes would be. For example, they exclude stepchildren, charities, friends or anybody else beyond surviving relatives, and they decide on your behalf exactly how your assets are distributed.

Another question you should ask before neglecting to make a will is: will your estate be utilised how you’d like it to if your spouse remarries after you die and has more kids? In the worst instances a will (or lack thereof) can inflame tensions among your family and loved ones. Though we don’t want to think about such things it’s important to understand how these very common scenarios could mean your inheritance wishes are not met.

It is sometimes possible for the beneficiaries of estates to use a Deed of Variation to distribute assets contrary to intestacy rules after death, but in complex situations the advice of a legal expert is invaluable.

Financial Advice while writing a Will

Even if you think your inheritance wishes are simple, it’s sensible to consider using a solicitor that specialises in writing wills. Unfortunately, not all will writing services offer the same quality, and a badly written one will not only fail to consider all potential scenarios but could even rule a will as legally invalid or open to challenge. Ascot Lloyd can recommend reputable lawyers that we have worked very closely with for many years.

Working with both a solicitor and an independent financial adviser when making a will could prove invaluable, as a solicitor alone may not have the expertise to ensure you are making the right financial decisions.

For instance, are there any opportunities to reduce your inheritance tax liability? Would it be wise to consider setting up a trust? Or even just ensuring you have completed the death benefit nomination forms in your pensions, as failing to do so, which is surprisingly common, could mean your beneficiaries can’t access that money for over a year.

One of the most important things is appointing your executors. Who are the people you trust to handle your estate when you pass away? Who will make sure your wishes are met as soon as possible? It's a big task with a lot of work so you need to make sure they're comfortable doing it.

There are a lot of things to consider when writing a will, but working with a good solicitor and financial adviser will make it a simple process while ensuring you are making the right decisions for yourself and your desired beneficiaries.

Inheritance Tax

Inheritance tax (IHT) is a charge from the government on everything you own, also known as your ‘estate’, after you die. If the value of everything you own at the end of your life is over the IHT nil rate band, currently £325,000, and you’re not leaving it all to a spouse, civil partner, charity or community sports club, the net figure is subject to a 40% tax charge, suffered by your beneficiaries, and paid by the executors within six months of your death.

Your IHT threshold can climb considerably in certain scenarios. The addition of a ‘residence nil rate band’, which applies when you are leaving your home to a direct descendant, adds £175,000 to your nil rate bands. Meanwhile, if you are widowed and your deceased spouse didn’t use any of their IHT nil rate band, it will transfer to you, meaning yours could be up to £1 million. The residence nil rate band will, however, reduce by £1 for every £2 that your estate exceeds £2 million.

Working with an independent financial adviser when drafting your will can be hugely beneficial because you can also have parallel discussions about ensuring your assets are passed on in the most tax efficient way. Whether through a strategy of gifting, utilising trusts and giving money to charity, or indeed all of the above, the earlier you start planning with your financial adviser the more opportunities will be available to you, preserving your legacy.

If you are interested in making a will or discussing other aspects of legacy planning with an expert, book a call back from an Ascot Lloyd independent financial adviser.