Writing a will is no easy task. Not only do you need to ensure all parts of your estate are accounted for (e.g. savings, property and collectibles), but the language needs to be legally sound to avoid misunderstandings later. However, failing to prepare a will leaves open the possibility that your possessions will be dealt with under the UK’s “intestacy” rules - which may not administer everything in a tax-efficient manner, or distribute your assets in the manner that you would have wanted. Below, we cover five essential steps to take when crafting a will.
Bear in mind that your will should still be updated regularly to ensure that it continues to meet your needs as you get older. To be legally valid in England and Wales, you need two people (non-beneficiaries) to witness and sign it, together with the date.
#1 Appoint your executors
Who should make sure that your will is adhered to after you are gone? Your will is ideal for assigning one or more trusted people (executors) for this role. Of course, make sure they are happy to do this before appointing them - and ensure they know where your will is stored, for easy finding later. It is also a good idea to have a “backup” executor in case your first choice(s) cannot perform the role (perhaps due to illness).
The executor role takes up considerable time and is not a light responsibility. Make sure they fully understand what they will be required to do. You may also need to be mindful of “family politics” when choosing executors. If you have 3-4 children, for instance, then would appointing only your eldest cause problems? It may help to have a family discussion about it, even though this is likely to be awkward or difficult.
In some cases (e.g. when dealing with an especially complex estate), it may be best to find a professional executor rather than relying on family. Although this comes with a fee, it can help ensure no mistakes are made and provides an impartial arbiter if there is a family dispute.
#2 Choose your beneficiaries
Who would you like to leave your inheritance to? As financial planners, we sometimes hear people say: “I don’t need a will; my spouse will just get everything when I die”. Yet assumptions like these can lead to mistakes later. For instance, in England and Wales, up to £270,000 in assets (including property) is left to a surviving spouse from the deceased’s estate if the latter did not have a will - together with all personal possessions. Half of the remainder, however, is divided equally amongst any children.
Naming your beneficiaries in your will helps to avoid problems later. If you want your spouse to inherit everything when you die, then you need to explicitly say so. However, most people are likely to have more specific wishes and it is important to thinking carefully about the various beneficiaries - and scenarios that might arise.
For example, do you want to leave anything to children or grandchildren? At what age - and in which circumstances - would you want them inheriting from you? How would you want your assets allocated if one of your beneficiaries died before you? Should anyone be excluded from inheriting anything?
#3 Name your guardians
If you have dependants, such as young children, then your will is ideal for specifying who would look after them if you died before they can live on their own. Similar to your executors, ensure that your guardians fully understand what the role entails, that they are happy to do it and that they are able to provide care (e.g. do they have enough space in their house). Also, think about setting up backup guardians, just in case.
#4 Identify all of your assets
It is almost impossible to be “too specific” with the assets in your will. Taking time to list all of them and set out what you want to do with them will give you great peace of mind (also saving confusion later). Be especially careful if you own assets outside the UK, such as property. Your UK will should deal responsibly with your UK assets, and you should ensure that any overseas assets are organised in a way that works effectively with your UK will. Assets might include:
You should also mention your outstanding liabilities - such as mortgages, credit card debt and personal loans - which will need to be dealt with if you die before addressing them.
#5 Plan for inheritance tax
Inheritance tax (IHT) is 40% on the value of an individual’s estate over £325,000, assuming no exemptions apply. There are tools you can use to minimise needless IHT liability, however, and your will is the perfect vehicle for employing them.
If you would like to discuss IHT planning, get in touch.