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Spring into action and review your Will.
For many of us a spring clean means sorting through a pile of papers at the back of the cupboard that hasn't been touched in years. Amongst these may be a copy of your Will, but how long ago was it made?
It is important that your Will is reviewed regularly to ensure that it continues to meet your needs. Having an outdated Will can be just as damaging as having no Will at all - it is estimated that £175million in assets is lost each year if an individual dies intestate or with an outdated Will. Here we highlight several reasons why your Will may no longer reflect what you wish to happen to your assets upon your death.
1. A change in family circumstances
Births, deaths and marriages in the family are all good reasons to review your Will. You may need to look at appointing new or different executors (the people who will administer your estate). You may also need to review the current beneficiaries – does your Will really provide for all your loved ones? Have you had a fall out so that you would no longer wish for certain people to inherit? It is important to make clear who you want to benefit from your estate and how much they are to receive.
2. A change in your own circumstances
Have you divorced or remarried since making your Will? Marriage automatically revokes a Will, meaning your existing Will would no longer be valid. Contrary to popular belief the “common law” spouse has no legal status. If you are in a long term relationship with a new partner but you have not provided for them in your Will, they will not automatically be entitled to any of your assets.
If you have had more children since you last made your Will you need to ensure they are provided for. For instance, if your current Will leaves everything to your daughter but you have since had a son, he will potentially lose out on an inheritance. This is particularly important if your children are under the age 18; you should appoint legal guardians to ensure your children will be properly looked after when you have gone.
A change in your assets should also trigger a review of your Will. Have you sold the premium bonds you left to your grandchildren or given away the watch you left to your brother? If you leave specific gifts in your Will but do not own the items at the date of your death these gifts will fail, and the person or persons you intended to benefit may lose out.
3. A change in taxation rules
Inheritance Tax is payable where an individual’s estate exceeds the “nil rate band” threshold of £325,000. If the estate exceeds the threshold, inheritance tax is chargeable at the rate of 40%.
Spouses and civil partners can leave assets to each other free of inheritance tax. This means they do not use their nil rate band. The surviving spouse therefore has the benefit of their own nil rate band plus their late spouse’s nil rate band, giving an overall tax free allowance of £650,000.
In 2017 a new residence nil rate band was introduced. This provides for an additional nil rate band in respect of residential property passing to children or grandchildren. As of 5th April 2018 the rate currently stands at £125,000, which can again transfer between spouses. This means married couples or those in a civil partnership can potentially benefit from a total nil rate band of £900,000. This will rise to £1 million by the tax year 2020-21.
It is important to review your Will in light of these recent tax changes, particularly if your estate is close to the inheritance tax threshold. Wills made before the nil rate band and residence nil rate band were introduced may no longer be suitable for tax planning purposes. Your legal advisor can review your existing Will and discuss whether it is still right for you.
Please contact a member of our Private Client team at any of our four offices if you wish to discuss changes to your Will.