Wills: a jargon buster
20 June, 2019
By Richard Woods of Bolt Burdon Solicitors
Let’s start off with a breif explanation of some of the terms
Beneficiaries: those who inherit under your Will or Intestacy.
Intestacy: where you die without a Will, or where your Will does not dispose of your entire Estate (for example you leave a gift to someone who dies before you, without making provision for who will inherit it otherwise).
Codicil: a legal document that amends an existing Will and/or previous codicil.
Estate: your property, after all your debts/liabilities have been paid.
Assets: means the property in your estate, including your home, possessions, and cash.
Liabilities: things that you owe money on, such as your mortgage, a bank loan or credit cards.
Executor: This is the person(s) you name in the Will who will then ensure that the terms of your Will are carried out.
Inheritance Tax (or ‘IHT’): this is the tax which is charged after death but only on the value of your assets in excess of the NRB.
Nil–rate Band (or ‘NRB’): this is the part of your Estate to which IHT applies at 0%. The general threshold is £325k per person, although further exemptions apply.
Legacy: a gift under the Will, whether a set amount or a proportion of the Estate, or a particular item.
Rules of Intestacy: standard rules that apply, that determine who inherits what, if you do not have a Will or part of your Estate is not covered by a Will.
What happens to my Assets when I die?
If you do not leave a Will, or your Will does not account for all your Assets, your Estate is distributed under the rules of Intestacy. This risks your Assets not going to those you intended, for example to a distant relative.
If you don’t have a Will you need to be particularly aware when:
- You are married with children
Your assets might be shared between your spouse and your children, and not go to your spouse outright as assumed.
- Where you are co–habiting and not married
Depending on whether and how you own the property your partner might have no automatic right to your Estate.
Gifts to the Charity
Charities have no right to benefit from your Estate under the rules of Intestacy; therefore if you would like to leave a gift to a charity, you must make a Will.
Where you have a Will already you could make a Codicil (which essentially amends your Will) to include a gift to charity.
What can I leave to Charity?
A gift can be of:
- money, expressed as a set amount or a percentage of your Estate; or
- any (other) Assets you own outright (such as company shares, land, or an art collection).
Are there any benefits in leaving gifts to a charity?
Inheritance Tax at 40% is generally payable where the deceased’s Estate exceeds the Nil–Rate Band (subject to various exceptions and exemptions).
Where you leave a gift to a qualifying charity, like Colostomy UK, no IHT will be payable on the gifted amount and if you leave 10% of your estate, IHT may be reduced from 40% to 36%.
Why not leave something to a charity as a “backstop”?
Including a provision in your Will that your Assets are left to charity, in the unlikely event that none of your family survives you, is something to consider.
For example, in December 2017 the CEO of the catering giant, Compass, together with all his main beneficiaries, died in a plane crash. Oxfam received £41m as the Will included a provision naming Oxfam as a beneficiary, but only in circumstances where his main beneficiaries had already died.
Should I speak with a solicitor?
While you can make a Will yourself, or use an online Will–writing service, to be valid and to ensure that your Assets go to those you want to inherit, you need to ensure that certain formalities are properly undertaken.
A Solicitor will ensure this happens for you. Without this guidance there is a chance that your Will might not work at all or as you intended.
In addition, without legal help you might not have considered what you would like to happen in certain circumstances, and indeed you might not be using your Will in a way that could lessen the tax burden which your beneficiaries might have to pay.
Making provision for your loved ones, and charities you hold dear, on your death is important – do not therefore underestimate the importance of making a Will and ensuring it is properly drafted.
We have considerable experience and expertise in Will drafting and other legal areas. We meet with you, discuss your intentions, advise on all the options available to you, and then draft your Will in a way that delivers on your requirements and provides you with peace of mind. You can then rest easy, knowing that everything has been done properly.