CLIENT INFORMATION - WILLS

Should I make a Will?

It is easy to put off thinking about this but it’s good to get it done and it’s a nice thing to do for those you care about.

What if I don’t make a Will?

Your possessions and investments will be distributed according to legislation.  People you would have liked to benefit may receive nothing.

Also assets you own may be “frozen” until an Executor is appointed and “Confirmation” is issued (that’s the Scottish equivalent of Probate/Letters of Administration).

Wills appoint the executor/s and also specify the beneficiaries.  If there is no Will there is no Executor and someone (usually a close family member) will have to apply to the Court to be appointed Executor.  That involves unnecessary cost and delay.

If I have not finally decided about beneficiaries what should I do?

Make a simple Will now and revise it when you can.  The Will can at least appoint the Executor/s and the provisions in it are likely to be better than nothing.  It costs little to do this – with us £60 plus vat if the Will is straightforward.

Do I need a list of what my assets are before making a Will?

No.  It can be useful in the case of an elderly client, but most of us don’t know how long we will live or what we will have at the time of our death.

What if circumstances change?

Often a well drafted Will does not need to be changed, but if it does – that’s easily done.

How can I make changes to my Will?

A standard clause often included in Wills allows changes to be made by separate signed note without the cost of making a new Will.  Alternatively a new Will can be made and that’s often better.

What are legal rights?

These are the rights that wives, husbands and children can claim even if they are not named as beneficiaries in the Will.  They don’t apply to “heritable property” e.g. flats, houses, land etc but do apply to “moveable property” e.g. investments etc.  Depending on the relatives involved legal rights apply to half or one-third of the moveable estate.  If e.g. a wife and three children survive the wife is entitled to one-third of the moveable estate and the children are entitled to one-third between them i.e. one-ninth each.  Legal rights only apply if claimed.  Often relatives will not claim legal rights and what is said in the Will applies.

Inheritance Tax

There may be no inheritance tax to pay.  There is a “nil rate band” (£275,000 as at 2005/2006).  Inheritance tax is paid at 40% on the balance.

In the case of a married couple does the nil rate band apply to each estate or only one?

If you take the right steps at the right time two nil rate bands can be utilised, but keep in mind that while it is good not to pay unnecessary tax it is also important that the surviving wife or husband should not be left short of money because of tax saving arrangements.

What if I don’t want to get involved in tax saving arrangements?

The result may be a large tax bill but not always.  Depending on the size of the estate a Deed of Variation may be the answer.  This allows beneficiaries (provided they all agree) to “re-write” the deceased’s Will so that the estate passes to the “right beneficiary” in the way that results in reduced or no inheritance tax.  This must be done within two years of the date of death.

For example,  a married couple have two children and the husband dies leaving his estate to his wife.  There is no inheritance tax payable at that stage.  On the wife’s death, only one nil rate band would be available.  If all beneficiaries agree and if the wife has sufficient means without what she was to inherit from her husband a Deed of Variation can be prepared under which estate up to the value of the nil rate band can go direct from the husband to the two children with the balance of the husband’s estate going to the wife.  In that way two nil rate bands will be utilised, one in respect of the husband’s estate and the other in respect of the wife’s estate.  The resultant saving in inheritance tax (based on 2005/2006 figures) is £275,000 x 40% = £110,000!

Do I need to take advice?

Yes.  You should not rely on general summaries.  Tax can be complicated and the rules are constantly changing.  You can’t assume that the same rules will apply in the future.

Should I consider setting up a trust to reduce inheritance tax?

Perhaps, but be sure that you understand fully what is involved and the possible problems as well as the possible advantages.  If in doubt, there is much to be said for keeping arrangements simple so that you and everyone else clearly understand them.

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