‘Buried six feet under the ground’ isn’t a pleasant thought whilst still alive hale and hearty. Imagine now being dead with an added aggravation of your neglected estate. It makes one ponder over the pivotal role that the person responsible for the administration of the estate plays after you have long left this world and the importance of making a Will.
In England and Wales, upon demise of a person who hasn’t made a Will, the intestacy rules apply. This means your property will be shared between all your nearest surviving relatives in accordance with the rules set out in the Administration of Estates Act 1925. For some this could mean distastefully turning in their graves.
A Will means you can direct who can inherit your property in accordance with your wishes and on the terms that you want. Personally, I would love to make a provision in my Will that passes some of my hideous collection of paintings (impulsively bought from Nothing Hill) to my nephew. On a serious note, it even allows you an opportunity to appoint guardians for your minor children should you die before they reach the age of 18 and to appoint an executor of your choice to administer your estate in accordance with your wishes.
Since a Will takes effect upon death, you are free to change your Will at any time in your lifetime. Many people are unaware that there are financial advantages in making a Will as it allows you an opportunity to engage in proper tax planning to mitigate the inheritance tax liability on your estate. Given today’s high property prices the nil-rate band (for 2011/12 is £325,000) will do little to avoid an inheritance tax liability if you have assets exceeding this sum.
It’s worthwhile to add here that property can also pass on death independently of the terms of the Will or under the rules of intestacy such as:
Joint Property: When property is held by more than one person as joint tenants in equity, on death of one of the joint tenant his interest passes by survivorship to the surviving joint tenants e.g. house or bank accounts;
Insurance policies: Life policies may be taken out for the benefit of specific individuals. In other words, it may be possible to put in place an arrangement whereby on your death the proceeds of the life policy are paid out to named beneficiaries of your choice;
Pension benefits: Some pension schemes allow for lump sum payments to be made by the trustee of the pension fund at their discretion to persons to whom you have indicated to them that you would like to benefit on your death.
It is imperative to take all the above stated in consideration both from a tax planning perspective and as well as ensuring your wishes are adhered to on your death before drafting a Will.
In fact claims made against the estate of the deceased, are not any longer an unheard matter. Although you are free to choose to whom to leave your property upon your death, the Inheritance (Provision for Family and Dependants) Act 1975 permits a variety of individual class of applicants to make an application to court for an award on the basis that the Will (or under the rules of intestacy) fails to make reasonable financial provision for them. Even though the 1975 Act sets out the framework as who can bring a claim it does not always follow that a person who falls within the class of persons set out in the act will succeed in their claim. This is a factor which should be taken into consideration when making your Will.
Lastly, if you own foreign property then careful consideration will need to be given to the law of the relevant country where the property is situated, as the law of that country may govern the disposition of those assets on your death. It would always be prudent to consult with a specialist lawyer in the jurisdiction where the property is situated and if appropriate consider making a separate Will for that jurisdiction. I trust this article to be useful to my readers in understanding the importance of making a Will.
By Sundeep Oberoi of SNV Solicitors