Three Reasons to Update Your Will

By: Tim Bennett
Over 60% of British adults don’t have wills, and those that do often fail to keep it up to date. In this short video I explain why that could be a mistake.

Why create a will?

Wills are documents that contain some vital decisions you have made in the event of your death. Example include;

Who will look after your estate?
Who will become the guardian of your children?
How will your assets be distributed?
What funeral arrangements do you want?

Looking at that list it should be pretty clear why failing to write a will is such a large oversight especially for anyone with dependents. So, let’s assume you have set one up – when should it be updated?

Rule changes

A good recent example of a rule change that needs to be thought about in the context of estate planning is the introduction of the new Residence Nil Rate Band for Inheritance Tax purposes. I have covered this in more detail elsewhere but in essence this increases the basic nil rate band for IHT of £325,000 per person by £100,000 in 2017/18 and then in annual £25,000 increments up to £175,000. This is summarised here;
The key issue, that many people who have already written a will need to consider, is the rule about who can inherit property so that this new tax-exempt band applies. Under the rules, only a direct “bloodline” descendant can benefit, so children and grandchildren qualify for example, but siblings do not. Anyone who wishes to ensure that they can use this new allowance needs to think about whether they want to adjust the beneficiaries of their will or not. There is no right answer here but given the size of the new allowance it does demand some thought.

Correctly applying existing rules

The government sometimes makes rules that are more complicated than perhaps they should be, or fail to fully foresee potential practical problems. An example is the current rules on ISA inheritability. At the moment if one spouse dies the other becomes entitled to an additional ISA allowance that enables them to make Additional Permitted Subscriptions up to the value of the deceased spouse’s ISA assets on death. However, it is worth remembering that, despite this, the assets held in the name of the deceased spouse may not be automatically transferred on death (they may choose to leave them to someone else for example). Meanwhile, the ease with which a transfer can be made in practice will depend on the ISA provider. This is therefore another area that is worth discussing with an Adviser. It is also an area where the existing rules may be amended, so watch this space.

A big change in your personal circumstances

Divorce and separation are now pretty common – indeed, it is estimated that successful first-time marriages now account for under 50% of the adult population in this country. However, people often fail to realise that such a big change in your personal circumstances can also have a significant impact on how assets are passed on. For example, did you know that;

Marriage, or a new civil partnership, automatically renders an existing will void The dissolution of a marriage, or civil partnership, on the other hand, does not Without a new will your assets may not be distributed in the way you would wish and the Intestacy Laws (which are inflexible and sometimes counterintuitive) will apply

What next?

If you would like to find out more about either setting up a will or updating an established one, please get in touch with our executorship and trustee services specialists via your Investment Manager.