Is it time to update your Will?
Have you made a Will? Yes? That’s great, but is it up-to-date?
Many people make their Wills, sigh with relief that they don’t have to contemplate their own mortality any further, and quietly get on with the very important business of living a full and enjoyable life. That is fine, as long as the Will you have made still meets your requirements. There are many reasons why that may not be the case:
The first and probably the most obvious question is, are you still happy to leave your estate to the stated beneficiaries? For example, if you named a child in your Will rather than using the more generic “my children” and you have had further children since the Will was signed, those younger children would not be included as beneficiaries. The same can be said of named grandchildren and you may wish to update your Will if further grandchildren have arrived since you signed your Will.
If you have left legacies of either specific items or sums of money, are you still happy for these people to receive these items or sums?
Executors and Guardians
It may be that people appointed in other roles, such as Executors and Guardians, need to be replaced as time goes by. You may consider the appointment of these people to be less important as they are not direct beneficiaries, however, if these people are now less suitable, it can cause huge problems. For example, you may have appointed your parents to be the Guardians of your infant children in your Will. This may have been appropriate when the children were little angels but if you are now struggling with the daily horrors of teenage tantrums and your parents are now a decade older, are they still the right people to be Guardians at this stage in their lives?
The key question to ask is, are the people you appointed in your Will still suitable now, considering not only physical and mental health but also geographic proximity? For example, you may have appointed a close and trusted friend to the role of Executor or Guardian but that friend may have moved away and become far less involved in your life than they were then.
Are you aware that if you marry, the act of marriage automatically revokes your Will? This is the case unless the Will is specifically written in contemplation of the marriage and is the case even if you are completely happy with the content of the Will made prior to the marriage. You would therefore have to update your Will after the marriage to ensure that your wishes are carried out. If you do not do this, your estate would be dealt with in exactly the same way as if you had never made a Will and your estate would be distributed in accordance with the Intestacy rules.
Generally, it is a good idea to update your Will if you divorce. Somewhat strangely, divorce itself does not automatically revoke a Will in the same way that a marriage revokes a Will but instead treats the former spouse as if they had died as at the date of the divorce. Again, roles such as Executorship may now not be fulfilled and you may also want to now consider alternative beneficiaries.
Nil Rate Band Discretionary Trusts Provisions
Prior to 2007 it was not possible to transfer the Nil Rate Band (currently £325,000) between spouses. This meant that in order to optimise the Inheritance Tax position, Wills were routinely made containing a Nil Rate Band Discretionary Trust where assets to the value of the Nil Rate Band were put into a Trust on the first death and effectively “loaned” to the surviving spouse for their life, thus using the first spouse’s allowance. However, from 2007 the Law changed which now allows the unused Nil Rate Band of the first spouse’s estate to be carried forward and transferred to the second spouse’s estate on the second spouse’s death. This is explored further in our Guide to Inheritance Tax Planning and Solutions.
Whilst these Nil Rate Band Discretionary Trusts were very useful at the time for Inheritance Tax purposes they may now no longer be necessary and in some cases it is sufficient to simply allow for the surviving spouse to inherit everything in the first instance, saving the additional work in bringing the Trust to an end after the first death. However, these Trusts do still serve a purpose for protecting assets against care fees and we would always suggest that you seek legal advice before making any changes.
The New “Residential Nil Rate Band”
From April 2017, there is now an additional “Residential Nil Rate Band” allowance of £100,000 available to be applied against Inheritance Tax (rising to £175,000 by April 2020). This allowance can be applied to property passing to “lineal descendants” of a “qualifying residential interest”.
These new rules are rather complicated and are considered not altogether fair. For example, a grandchild may be considered a “lineal descendant” but if your Will provides that they cannot inherit until they reach a specified age, the Residential Nil Rate Band will not be available against that gift and you may wish to consider changing the way in which you distribute your estate to maximise the allowance. This is also explored further in our Guide to Inheritance Tax Planning and Solutions.
Our advice to all of our clients is that you should keep your Will under review as time goes by and if your personal circumstances change. Even if that means just reading through the Will once every 3 – 5 years just to make sure that it still meets with your wishes.
If you would like an appointment to review or update your Will or simply to discuss any of the above issues then please feel free to contact us on 01245 504904 to book an appointment.