Do you have a long to-do list? It may be a case of out of sight, out of mind; the average adult spends £672 a year on subscription services, but how many have been meaning to cancel the barely used streaming account or a well-intended gym membership?
There’s a better than 50/50 chance that organising your will is still on your to-do list. A surprisingly commonplace to-do is to organise your will, with nearly 60% of the population living without one.
Whether you consider yourself still too young, not yet wealthy enough (a large misconception given property prices, especially in the South East), or you just haven’t got around to it, without a legally valid will, you seriously need to consider who is entitled to your property, possessions and savings when (not if!) you die.
If you die without a will in place, you are considered as having died ‘intestate’, and under the rules of intestacy, there is a specific priority of family who may inherit your estate.
In England and Wales (it does vary in Scotland) married and civil partners take ultimate priority, with blood relatives following in this hierarchy:
- Your children, by birth and adoption, or their descendants (i.e. grandchildren if their parent, your child, has already died)
- Your parents
- Brothers and sisters or their descendants (niece and nephews etc)
- Half-brothers and half-sisters or their descendants
- Uncles and aunts or their descendants (cousins)
- Half-uncles and half-aunts or their descendants
- The Crown!
Quite simply, if you are married or in a civil partnership and have no children, your partner stands to inherit your entire estate.
However, if you are married or in a civil partnership with children at the time of death, your partner will inherit the first £250,000 of your estate and half of the remaining sum. Your surviving children will inherit the remaining estate equally between them. If your estate is worth less than £250,000 the whole sum is passed to your married or civil partner.
There are joint ownership rules to take in to account, under which joint bank accounts are passed to the surviving account holder. Similar rules apply to some types of jointly owned property, but actually making a will is the only way of being in control of who your assets go to and in what proportion.
Let’s consider some scenarios with an estate of £1.2 million:
Cohabiting with partner and your two children. You also have a child from a previous relationship
Your partner that you have lived with for 10 years, but are not married to, is entitled to absolutely nothing! The funds are split equally between your three children i.e. £400,000 each, which they are unable to access until they are 18 years old.
Separated but not yet divorced, with no children
Your ex-partner is entitled to the first £250,000 of your estate and half of the remaining funds, totalling £725,000 (over 60% of your estate) which may not be entirely what you had in mind. Your parents have sadly passed away, so the next blood relatives for consideration are your two sisters. Each sibling stands to inherit £237,500.
In a relationship, unmarried with no blood relatives
Importantly, with no will, this circumstance is known as Bona Vacantia or an ‘unclaimed estate’. Effectively your entire life’s financial value is passed to the Crown. Goodbye, God bless!
Under any circumstance, there may be significant people or organisations you passionately regard that the rules of intestacy completely disregard. They may be, but are certainly not limited to:
- Unmarried partners
- Relations by marriage
- Non-related financial dependents
- Lifelong friends
- Valued colleagues
- Community groups
- Clubs and Societies
There are also two enormously practical benefits to making a will:
- Minimising time and stress: If you have considered the intestacy rules and concluded they reflect your wishes, remember that your loved ones can finalise everything much more quickly if you leave a valid will.
- Inheritance Tax: If your estate is large enough to be potentially subject to IHT when you die, a will can be a useful tool to help reduce that. Also, anything you leave to charity is free of Inheritance Tax and can be a useful way of reducing your bill, while benefiting a cause close to your heart.
Whilst you are considering estate planning, now is a good time to review the death benefit nominations of your pensions, to not only reflect your wishes, but to do so in the most tax-efficient manner.
Almost 60% of people without a will have no influence who (or what) benefits from their estate and in what proportion. A relevant, current, valid will is quite likely to be the most significant, widely impacting ‘to-do’ on that list.