Why You Need a Will
What Is a Will?
A will is a legal document that determines who will receive your worldly goods after you pass away. However, a will does a lot more than deciding who receives the family china; it can protect your assets and provide for vulnerable family members over a long period if you use it to set up a trust.
A will can be one of the most important documents you will ever sign and should be treated with the weight and respect that it merits.
If you pass away without leaving a will, then your assets will be distributed according to the rules of intestacy. This can mean that your assets may not go to the person you want to provide for, and you may find your estate exposed to more inheritance tax than you would have paid had you set up a will.
What a Will Does
A will is more than a list of ‘who-gets-what’; it is a legally binding document, those who you place in charge of your estate have to abide by it. A will is also a way of distributing your assets in the most cost-effective and protective way possible. A will can allow you to do all of the following:
What You Can Do
What This Means
Leave part of your estate to a charity of your choosing
Leaving 10% of your estate to charity can lower your inheritance tax; rather than paying 40% tax you will pay 36%.
Nominate certain people to look after your estate after your passing; these people will be your executors.
You can pick and choose those who you trust the most, or who you feel are the most capable to deal with your estate. This avoids the duty falling to the next of kin who may not be the best-placed individual to deal with your estate.
Appoint guardians for your children
If you pass away before your children turn 18, they will need legal guardians. If you nominate these people in your will, you will be sure that your children are left in the care of those you trust to love them and provide for them for their future.
Take care of your business
If you run your own business, you can specify who this will pass to. It may be that you wish to leave your business to a friend or relative who is not the next of kin under the intestacy rules. Nominating this person in your will ensures that your business will pass to those best placed to make it thrive for generations to come.
Reserve benefit for property
You may wish to provide for your spouse but also want to reduce the risk of losing property to potential care home fees and future inheritance tax. You may want to leave your share of the family home to your children for this reason, but this runs the risk of that share being taken into account should your children become bankrupt or be divorced. Under your will, you can leave your home to your children but give your surviving spouse reserved benefit. This means that while your surviving spouse will not own your share of the home, they will be able to live in it for the remainder of their life or until they choose to leave, then it will pass fully to your children.
Set up a trust
You may wish to leave an individual a gift in your will but have concerns about giving them a gift outright. You can set up a trust where a third party holds an asset for the benefit of your chosen person. The chosen person could receive income from the asset if it is invested, for example, but they will not own the asset outright. This is also useful if you want to leave a gift to someone who is under the age of 18 and unable to inherit.
What If You Already Have a Will
If you already have a will, you may think that everything is taken care of and that may be the case. However, it is important to keep in mind that circumstance change and your will should be updated. It is wise to consider updating your will every five years or so to keep it up to date.
You should also update your will when something significant happens in your life. For example:
- You purchase more property.
- You sell a property. A gift will fail if the given item is no longer in your possession; someone you thought you had provided for will miss out.
- You marry. A marriage will negate a previously made will.
- You divorce.
- A child is born.
Do You Have a Will?
Can You Make Your Own Will?
In short, you can make your own will and have it work perfectly.
However, you must be aware that a will is an important legal document, and for it to be valid it must adhere to certain rules and be in a certain format. If your will does not follow these rules, it could be invalid and therefore unusable. It is very easy to make a simple mistake that could render you carefully thought out document useless.
Language is important in a will: it must be clear and unambiguous. If it is unclear what you meant then a gift could fail. You must clearly identify each item and each person mentioned in your will if there is any element of confusion over who or what you meant.
Your will must be signed and witnessed by two people who do not inherit under then will. If one of your witnesses receives a gift under your will, the will may still be valid but that gift will fail.
When Should You Use a Professional
It is always a safer bet to use a professional to draft your will. Even if you think your estate is very straightforward, that does not mean it will be straightforward in the legal sense. If you own property abroad, for example, then that property will be subject to that country's probate laws. If your estate is over the inheritance tax threshold, there are certain steps you can take now to reduce your tax bill that you may be unaware of. If you own a business, then a will is essential to ensure that the business survives after you have passed away and that it has the best opportunity to thrive.
Drafting your own will runs the risk of your gifts failing or your family having to employ a professional to pick apart your DIY will and try to manage your estate. You may save money in the short term, but in the long term, it can be far more expensive to run this risk.
You should now have an understanding of what a will is, and why it is important for you to have one, even if you believe your estate is small and simple. A will is an invaluable asset for your household.