Benjamin Franklin may not have been the first person to say it but he was, perhaps, the person who said it best. In his 1789 letter to Jean-Baptiste Le Roy, Franklin stated, “Nothing can be said to be certain, except death and taxes” and unbeknownst to some people, you can’t even escape the clutches of the taxman at death… or can you…?
It wouldn’t be an exaggeration to say that Estate Planning is a subject most of us don’t like to think about and one that some people never think about at all. Either way, taking the ostrich approach or not even being aware that this uncomfortable topic needs to be addressed, leads to the same place, more stress for those you leave behind, on top of having to deal with the pain and stress of bereavement. It could also mean that your assets end up somewhere or with someone that was not your intention, with things getting somewhat vexatious.
With this in mind, we thought it was time to go back to basics to help you understand the importance of Estate Planning and particularly Will writing. You might like to think of it as a prenup with the angels. However you want to think about it, dealing with a bit of discomfort now will save a lot more irritation in the future for those you want to make provision for after your passing.
According to research by Canada Life in 2020, “Three in five (59 per cent) of UK adults have not written a will. This equates to 31 million people, whose property, financial and other assets could be left to someone they have not chosen when they die.” Ouch, that is a lot of people and potentially a whole lot of aggravation. Think your children will automatically inherit your estate? In the words of Ira Gershwin, “it ain’t necessarily so”. At Planning Bee, we believe your Will is the most important document you will ever own. The onset of the Coronavirus Pandemic has precipitated an increase in Will-making along with Will altering but many people are still yet to make a Will or have made one which could be literally worth the paper it’s written on. Effective Will-making doesn’t need to be difficult or expensive and we think a solid Will can bring you peace of mind and that peace of mind is, well, priceless.
There are many things to consider when making a Will, which is why it’s better left in the hands of experts. The risk of making a will yourself, whether writing a homemade Will or using a DIY, kit is that your wishes may not be honoured and this can cause a lot of unnecessary angst and conflict within the remaining family. Engaging professionals mitigates the risk of the Will being contested and can also mean that your assets are preserved as much as possible for the intended allocation between those you want to continue to look after when you’ve gone.
The Importance of Trusts
A Trust is a fiduciary arrangement (where a Trustor grants a Trustee the right to hold title to property or assets for the benefit of a third party. A Trust is active immediately upon creation, whereas your Will only comes to life (somewhat ironically) after you die. Trusts can be a way of better ensuring your wishes are fulfilled and to avoid any lengthy Probate issues as Beneficiaries inherit immediately upon your passing.
Here are some of the more straightforward types of Trusts to consider:
Right to Occupy Trust – this right enables someone like a child or a new partner who is living in your home at the time of your passing to remain in the home even if it has been left to another Beneficiary. The thought of a loved one becoming homeless as a result of your passing is something most of us would like to avoid. This problem is increasing due to the number of UK couples who cohabit without being married increasing 43% between 1996 and 2016 (and only 26% of these couples have made a will as compared with 50% of married couples).
Discretionary Will Trust – this kind of trust is created at the time of passing to hold the inheritance of disabled or vulnerable Beneficiaries. A Discretionary Will Trust can also be effective in protecting the loss of inheritance due to Inheritance Tax (IHT), bankruptcy or divorce.
(Flexible) Life Interest Trust – Similarly to the Right to Occupy Trust, this type of trust protects new partners from potential destitution and/or homelessness upon the death of the Testator due to children most often holding the right to inherit over new partners. Provision can be made for new partners in the form of the setting-up of a trust to provide ‘life interest’ or regular income. Now that really is the gift that keeps on giving. These trusts can also save the Beneficiaries from having to pay vast amounts of IHT.
Protective Property Trusts – Like a Life Interest Trust, a Protective Property Trust protects chosen Beneficiaries (usually the children of the deceased) from having their inheritance eaten into by care fees or losing it altogether due to Sideways Disinheritance. Sideways Disinheritance can occur in the case of subsequent marriages (if the estate passes to the new spouse), therefore disinheriting the children of the first marriage.
Like most things legal and financial, Trusts can be more complex as required. Family Protection Trusts can be created to protect your estate against a range of threats. Here we have provided a brief description of a small selection of Trusts to outline the benefits.
Commonly Used Terms
To make the business of Will-making feel a little less scary, we’ve included a list of commonly used terms. We’ve kept it simple so here it is in plain English:
Administrator – When someone dies without a Will, the estate will be dealt with under Intestacy Rules and handed over to an Administrator, who must be qualified and deemed appropriate to fulfil this role.
Beneficiary – Person(s) or an organisation who will receive assets from the deceased’s estate.
Codicil – A document listing changes, deletions, modifications, additions or extensions to an existing Will.
Estate – Property or possessions of the person who has passed.
Executor – The person nominated as representative by the Will or Codicil
Fiduciary – This term is used both in law and finance and relates to both trust and reputation.
Intestacy Rules – When someone passes without having made a will, these rules govern who will deal with the estate and where the estate is to pass.
Inheritance Tax (IHT) – In its most simple terms, IHT is a tax on the value of a person’s estate and also on the value of gifts made during their lifetime, payable at the time of their passing. Death and taxes; together in one convenient revenue-generator for the Government.
Legacy – A specific gift left to individuals or an organisation as nominated in the Will. There are different types of Legacies such as Pecuniary (cash), Specific (an object like jewellery or a painting, shares or property)
Probate – The term probate is used to describe the legal process that manages the assets and liabilities left behind by a recently deceased person. Probate proves the Will as a valid public document in a court of law.
Residue – The remainder of the estate of the Deceased after the discharge of debts and the allocation of any gifts made under their Will.
Revocation – The process by which someone cancels or takes back a previous Will (or Codicil). New wills usually contain a specific clause stating the revocation of any earlier wills (or Codicils). The Testator must be deemed to be of sound mind to revoke the Will (or Codicil).
Testator – Male Will-maker.
Testatrix – Female Will-maker.
Trust – One or more persons acting in trust and holding property for the benefit of the Beneficiaries.
Planning Bee’s Paralegals are qualified professionals who have helped thousands of families with their Estate Planning over the years. They have decades of experience in innovative bespoke Estate Planning and lasting Asset Protection advice. Size doesn’t matter at Planning Bee, no matter whether you want to leave your prized thimble collection or your Ferrari 250 GTO and suite of global properties, Planning Bee will tailor an holistic Estate Planning Solution and ensure you don’t pay for something you don’t need. Take advantage of our complimentary initial consultation because reassurance is just a buzz away.