Why you should consider making a will
Currently, it’s thought that some 45% of the adult population in Great Britain have a last will and testament, with this figure up by 6% when compared with the previous year.
However, this remains a disconcertingly low percentage, especially when you consider the ageing nature of the UK’s population and how a will enables your estate to be distributed according to your express wishes.
But what are the exact benefits of making a will? Here are some of the most important considerations.
Why is a will so important?
There are numerous reasons why you should create a will, but the most important revolves around how your estate will be distributed without formal documentation.
More specifically, there are certain rules which dictate how your money and corporeal assets should be allocated in the event of your death, and these will be enforced in instances where no will exists.
What’s more, unmarried partners and people who haven’t registered a civil partnership cannot inherit from one another without a formal will, meaning that unofficially ‘shared’ assets could be unfairly taken by the surviving partner.
For those of you who have children, a will ensures that formal plans are put in place in the event of both parents dying. While this is a horrible thing to even contemplate, it allows you to determine who will be made the legal guardians in the event of your death, providing important peace of mind and security for dependents when they need it the most.
How much tax will you pay?
While inheritance tax (IHT) remains a controversial levy in the UK, there are quite stringent thresholds in place which means that many households won’t be required to pay.
For example, there’s usually no tax payable if the value of your estate is lower than £325,000, while the same rule applies in instances where you leave everything above this value to your spouse, civil partner, a charity or community amateur sports club.
Anything above the £325,000 threshold that isn’t bequeathed in this way will be taxed at a rate of 40%, or 36% if you leave at least 10% of your estate after any deductions to a charitable course.
If you do leave assets to your spouse or civil partner, they’ll be exempt from paying IHT so long as they’re residing in the UK. You should also note that your partner’s IHT allowance rises by the percentage of your allowance that you didn’t use, creating a scenario where a couple can theoretically leave £1 million tax-free in the event of their passing.
If you want to reduce the portion of your estate that may be subject to IHT, you could also consider ‘gifting’. This refers to the process of giving assets away to your loved ones or dependents at least seven years before your death, while this also eases the management of your estate in the future.
The role of probate in administering your estate
In between the creation of a will and the distribution of your estate, there’s a requirement to appoint personal representatives or ‘executors’ who will deal with your assets.
This is referred to as probate and will help to manage your estate efficiently, particularly in terms of calculating IHT, administering assets promptly and executing the will in accordance with the wishes of the deceased.
Often, it can take between six months and a year for an estate to be distributed in the UK, so an efficient probate process can help to minimise the timeframe and make asset management as straightforward as possible during a challenging emotional time.