Many Britons are failing to put their affairs in order before they die, and potentially leaving their families to face an inheritance nightmare.
A fifth of people say their parents definitely haven’t made preparations or drawn up any documents relating to their death, according to research by the investing platform Hargreaves Lansdown.
One in four people have no idea whether their parents have made any preparations or not.
Last wishes: Having a will is the best way to have a say on what happens when you die
Completing a will, setting up lasting power of attorney, creating an assets register and writing a letter of wishes are key issues being neglected, according to the research.
Only two in five people are certain their parents have a will, while a third who know their parents have a will don’t know where to find it.
‘We owe it to our families to spare them the agony of wondering what we would have wanted, and to get the paperwork done so they don’t end up inheriting a headache,’ said Sarah Coles, personal finance analyst at Hargreaves Lansdown.
‘If your parents have written a will, they’re already in the minority of the most organised.
‘It makes a huge difference, not only because it divides their estate exactly as they want, but also because whoever is left distributing the estate knows they’ll be carrying out their loved one’s wishes.
‘But once you’ve drawn up a will, the job is only half done, because there are other vital documents to consider, from a lasting power of attorney to a register of assets which reduces the seemingly endless admin that comes with tying up an estate.’
What are the risks of not making a will?
If someone dies without a will their estate is divided according to intestacy rules, which may not match their wishes.
For example, if someone is not married, their partner may inherit nothing when they pass away.
By not making a will, you also forfeit the ability to lessen the inheritance tax burden placed on those left behind as well as the opportunity to choose a legal guardian whom you trust for any children under the age of 18.
Power of attorney: You have the chance to choose who will have access and control over your money and assets if you are too ill to deal with them
‘Without a will, you’re unable to control who your assets are distributed to when you die,’ said Elaine Roche, director at Solicitors For The Elderly.
‘This means that if you had wanted to leave money or other assets to a close friend or relative that is not a direct descendant, such as a niece or nephew, or perhaps your favourite charity, they would be entitled to nothing.
‘On top of that, if there are any disagreements between family, this can cause hardship, worry and even incur unnecessary legal expenses, whilst you could also miss out on receiving important advice on how to reduce your inheritance tax bill.’
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What about lasting power of attorney?
Just one in five say their parents have a lasting power of attorney in place, according to Hargreaves Lansdown’s research.
A lasting power of attorney is a legal document that enables you to appoint someone you trust to make decisions on your behalf were you to lose the mental capacity to do so.
Although your will is what matters when you die, a lasting power of attorney is vital in protecting your affairs whilst you are still alive.
It can be beneficial to set up two – one for health decisions and one for your finances.
If you don’t have a lasting power of attorney in place and you become too ill to deal with your own affairs, someone may be chosen to deputise and a court will decide the limit of their powers.
This is likely to cost more, due to the court process and annual fees involved.
‘If there’s no lasting power of attorney in place and you later lose capacity to manage your affairs, it’s expensive for someone to apply for a “deputyship order” – where a court application has to be made to ask the court to appoint an attorney,’ said Dan Garrett, chief executive of Farewill.
‘This can be a stressful and long process, leaving your family in a difficult situation.
‘Leaving it to the court could also mean they choose someone you don’t want as the person responsible for dealing with your affairs.’
What are the benefits of making an assets register?
Fewer than one in ten think their parents have a register of assets, which could include bank accounts, investments, pensions and insurance policies for example, meaning many families may struggle to untangle finances.
Listing out your assets ensures that everything is easy to find when you’re gone.
An assets register is a list showing all of a person’s belongings and assets, where they’re located and the details of ownership.
‘Without a register, it will be up to your loved ones to trawl through all your affairs and try to work out what you have and where it is held – it can be an onerous burden at a time when they’re going through so much,’ said Coles.
‘Your loved ones could overlook assets when your estate is going through probate – or miss debts that have to be repaid.
‘They could also be unaware of life cover due to be paid out.’
How will a letter of wishes help your loved ones?
Only seven per cent of people say their parents have a letter of wishes alongside their will, according to Hargreaves Lansdown.
This is where someone leaves private details for the executors that they’d prefer not be made public in the will.
It’s also often where people leave details of who should receive personal belongings.
‘In some situations, it’s especially important to make known your personal intentions behind the legal provisions in your will,’ said Garrett.
‘For example, if you’ve intentionally left someone who might otherwise expect to receive an inheritance out of your will or left them less than they may expect.
‘A letter from you explaining why can sometimes avoid a dispute altogether or give your executors and ultimately the court your point of view.’
Making a will? A five-step guide
Alistair Spencer, associate at Lime Solicitors, offers the following to-do list.
1. Work out what assets you own
The value of your assets and how those assets are held, for example in property, shares and so on, will determine whether your estate might be taxed upon your death.
It is worth putting together a schedule of your assets and liabilities with at least approximate values, before attending a meeting with a legal professional to make a will.
The legal professional will consider what tax relief might be available, and the most appropriate and tax-effective way of structuring your will.
2. Decide who will benefit from your will
Many wills are disputed because family members are left shocked and angry by the contents once a loved one has passed away.
This can lead to costly disputes and the will writer’s decisions being scrutinised and potentially changed.
This is why, once you’ve written your will, it is important that you communicate its contents with your family and friends to ensure there are no surprises down the line.
If the contents of the will could be seen as potentially contentious, it is often advisable to prepare a letter of wishes to be kept with it, setting out why you have made the decisions you have in your will and why certain people might be excluded.
3. Choose your executor
Ideally you should name more than one person to act as your executor, as this minimises the risk of both executors passing away before you.
You can also choose one or more substitute executors if the executors you have named are unwilling or unable to act.
Executors are the individuals who will carry out the terms of your will and sort out your estate when you die.
They should be individuals you trust implicitly, must be over 18 at the time of your death and must be mentally capable of doing the job.
If naming more than one executor, ensure as far as you can that the executors will be able to work together.
It might be sensible to appoint at least one professional executor, although there will be costs associated with this. An executor can also be a beneficiary of your will.
4. Find two witnesses
Any witness should be independent, so they should not be a beneficiary of the will or a spouse or civil partner of a beneficiary.
Any gift you make to the witness or to their spouse or civil partner will fail.
If you make your will via legal professionals they will usually provide the independent witnesses.
You must have a minimum of two witnesses and they must both see you sign or acknowledge the will in their presence before signing the will themselves.
A recent announcement from the Government allows virtual witnessing of wills from 31 January 2020 to 31 January 2022, or such other time period as the government may decide. The will must still be physically signed by the witnesses and the the person making the will.
5. Keep your will updated
In my experience, many people often forget to update their will after a significant life event and risk the document not outlining what they want it to do.
This doesn’t mean that you have to make a new will, as often the changes are quite straightforward.
Once you’re married, any will made prior to your wedding day will be automatically revoked – so if you do separate from your partner, changes need to take place to reflect the change in your circumstances.
It is not unusual to come across situations where an individual has passed away after divorcing but has failed to update their will, resulting in their former partner still benefiting from their estate.
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