Making a Will is one of the most important things you can ever do because it allows you to direct who should share in your estate after your death. That includes who should inherit your property and how your assets and investments should be divided. These are just some of the things you must consider when making a Will. It is important to plan in advance to make sure you do not miss anything or anyone out. Being aware of the key aspects of making a Will can aid in making the process as smooth as possible.
Choosing your executor
One of the critical aspects of making a Will is choosing the right executor. They are responsible for carrying out the instructions left in your Will to effectively distribute your estate.
Many people choose their children, spouse, or close family members to be their executors; however, your executor does not have to be related to you. The key is to appoint someone you trust. It is a personal choice, and you are entirely free to appoint whoever you choose. This could be friends or professional advisors such as solicitors and accountants. You should discuss with anyone you wish to name as an executor in your Will, that you intend to do so, giving them an opportunity to refuse if they do not want to take on the role.
You only have to appoint one executor, although it is advisable to appoint more than one person. This is especially important if your executor predeceases you or when circumstances mean that they can no longer fulfil the role. If you have appointed a spouse, partner, or someone who you think may not outlive you, it is always a good idea to think about appointing either a joint executor or a substitute executor. By doing this, you will avoid the complications of additional procedure being required to appoint a substitute executor.
Establishing the value of your net estate
An important aspect of Will planning is to establish the value of your estate. You need to aggregate the value of your property, assets and investments and deduct the value of any liabilities. For instance, you should ascertain the value of your house or your share in your house and then deduct the amount of your share of the mortgage outstanding. These figures will inevitably change over time, but the purpose is twofold. This exercise will help you understand if you have an Inheritance Tax (IHT) problem, and it will help with your wider estate planning.
Consider the IHT position
Once you have worked out the value of your estate, you will discover if you have a potential IHT problem. The first step will be to look at whether you have made any gifts in the previous seven years which could impact your available “nil rate band”, which is currently set at £325,000. If you have a full nil rate band available, this is taxed to IHT at 0%. You may also benefit from the residence nil rate band, an additional £175,000 taxed at 0% where you leave a qualifying interest in residential property to direct lineal descendants, although this may not be available to high value estates as it starts to taper by £1 for every £2 over £2million. Generally speaking, any estate in excess of your available nil rate bands and which is not subject to a relief like Business Property Relief or Agricultural Property Relief is taxed at 40%. Valuing your estate might prove challenging, as we discuss in our article Common problems when valuing the estate of someone who has died.
As with most taxes, you can take steps to mitigate the impact of IHT. We look at IHT mitigation in our article entitled Essential advice you should know about estate and tax planning.
Who will be your beneficiaries?
Usually, you will have no difficulty identifying beneficiaries. Your beneficiaries are the people and organisations you name in your Will who will inherit your estate. The question usually is “how much to whom?”. You might wish to make a bequest of a favourite item to a grandchild, or to make a legacy leaving money to charity. If you are leaving a sum of money to beneficiaries, this can be expressed as a fixed figure, or as a percentage of your estate.
In Scotland, you will also need to take into account the Legal Rights of your spouse, civil partner and children and how they might react to the terms of your Will. This system of forced heirship is unique to Scotland and can override how you would like to dispose of certain assets in your Will. We discuss these rights in our article Scotland’s System of Legal Rights. The position can be contrasted with England where testators generally have complete freedom to include or exclude beneficiaries as they see fit, although family members could in some circumstances make a claim for financial provision to the court.
Finally, in these days of blended families, challenges arrive when stepchildren are involved. Some thoughts on this subject can be found in our article on Estate planning for blended families.
Your solicitor will guide you through your options and explain the intricacies of Legal Rights to enlighten your decisions.
When should you review your Will?
We always recommend you review your Will on a regular basis. This might be every three or five years. Everyone’s circumstances are different so a regular review process will be governed by those circumstances.
However, if there is a material change in your circumstances, you should review your Will to check that it continues to meet your needs and if it does not, take steps to change it.
We address this issue in our article Is there a right time to review your Will?
Specialist Wills Lawyers, Edinburgh
Adam Swayne is a Senior Solicitor within our Asset Protection Group and specialises in Estate Planning and Wills.
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