The Importance of Making A Will
Many people delay writing their will.
Sometimes it feels like a task that can wait until later in life, sometimes the subject is simply uncomfortable and for others, it sits on the to-do list but never makes it to the top.
The truth is, making a Will is one of the most important legal and financial decisions you can make, regardless of your age or your financial situation. It ensures that your assets are passed to the people that you want to provide for, protects your loved ones from unnecessary stress and can safeguard your estate from significant amounts of Inheritance Tax (IHT).
What happens without a Will?
If you die without making a Will, you are said to have died ‘intestate’. In this situation, the distribution and administration of your estate will be dictated by intestacy laws instead of your personal wishes. This can create several problems including assets not going where you intended as unmarried partners, stepchildren and friends are left with nothing, regardless of their importance in your life. It can create family disputes as a lack of clarity over your wishes can lead to conflict, strained relationships and legal battles and costs. The process of administering an estate without a Will is more complex and time-consuming which can cost your loved ones money on lengthy legal costs and cause uncertainty for them at a time of bereavement. Also, if you have children under 18 and you die without making a Will, it will be the courts that decide who becomes their guardian, not you.
Case Study: The Cost of Dying Without a Will
Consider Mr Woollcombe, who passed away suddenly without leaving a Will. He had lived with his partner Miss Yonge for 25 years. They shared a home, but it was solely in Mr Woollcombe’s name. Mr Woollcombe also has two adult children from a previous marriage. As he died intestate, Miss Yonge inherited nothing, despite living in the home for 25 years she had no automatic right to it and ownership passed directly to Mr Woolcombe's children.
To stay in her home, she had to negotiate with the children. This created tension and led to expensive legal proceedings. Sorting out the estate took nearly two years, as the probate process was slowed by disputes and the lack of clear instructions. Significant legal fees and court costs were paid out of the estate, reducing the amount of inheritance for everyone. To make matters worse, as there was no tax planning the estate paid more Inheritance Tax than necessary, tens of thousands of pounds that could have been inherited by his loved ones.
Case Study: The Mother Who Planned Ahead
Now consider Miss Woollcombe, a single mother who sadly passed away leaving a young son. Her estate was valued at £354,000, made up of her home worth £350,000 and savings totalling £4,000. Because she had a prepared and valid Will, everything was clear and straightforward. Her Will named her sister as her son’s legal guardian. This avoided any uncertainty or court intervention about who would look after him.
Miss Woollcombe's estate was able to claim the nil-rate band of £325,000 plus the residents nil-rate band as the home was being left to her son. This gave her estate a total allowance of £500,000. With the estate being worth £354,000 there was no inheritance tax to pay. Her Will placed the assets into a trust for her son until he turned 18, ensuring that the house and savings would be managed responsibly until he was old enough. The Will named two executors, her sister and a family friend, who were able to settle her affairs within 9 months, keeping legal costs to a minimum.
The Role of Tax Planning
A well drafted Will doesn’t just decide who inherits, but also about how they inherit in the most tax efficient way. In the UK, estates above the inheritance tax (IHT) threshold are taxed at 40%. The current nil-rate band is £325,000 per individual, meaning no tax is payable on this portion of your estate. Additionally, there is a residence nil-rate band up to £175,000 when leaving a main home to direct descendants, which can increase the amount you can pass on tax free.
Couples can combine their allowances, meaning they can potentially pass on up to £1 million without IHT becoming payable. Anything above this is subject to 40% tax.
To effectively tax plan through your Wills you can structure them to fully use both spouses’ allowances, make accommodation for lifetime gifts which are IHT free, place assets in a Trust to protect them or make charitable legacies to reduce the rate of IHT. A trust can even be used to protect assets from the payment of care fees should care be needed for your beneficiary.
Case Study: Efficiency in Action
Now, let’s look at Mr and Mrs Yonge, a married couple with two children. Their combined estate was worth £1.1M including a family home worth £750,000 and investments of £350,000. With the help of a solicitor, they set up their Wills to take advantage of the full range of allowances. The property was jointly owned and the half share belonging to the first estate was left on trust with a right for the survivor of them to occupy that half share for the whole of his or her lifetime. The capital value of that half share was left to the two children who would be able to access this capital share on the death of the surviving spouse. Everything else in the estate was left to the surviving spouse. This type of planning ensured that the full IHT allowances of £1M could be claimed on the 2nd death and the share of the property in trust was disregarded from means testing when the surviving spouse required care. After the first death had occurred, the surviving spouse made a gift to the children of £50,000 each and once they had survived 7 years this brought the value of the estate to £1M meaning that no IHT was payable; a saving of £40,000 as well as ringfencing a half share of the property from the payment of care home fees.
Making a Will is not just about dividing assets, it’s about protecting your loved ones, minimising tax, and ensuring your wishes are respected. Whether you have a young family, a partner, or a lifetime of savings tied up in your home, a Will offers peace of mind and financial security.
Book your Will consultation today by calling 01752 660384. Our experienced team will guide you through every step, ensuring your Will is watertight, tax efficient, and tailored to your needs.
Article written by Megan Reynolds, Trainee Solicitor in the Wills, Trusts and Probate Team.