Wills, Trusts and Tax Planning

The short answer is “yes”. If you wish to have complete control and certainty over:-

(a) Who your executors are – who will be responsible for sorting out your affairs,
(b) Who your beneficiaries are – who actually receives your assets,
Then a Will is essential. You may also wish to determine who will be guardians for your children; whether certain personal belongings or minor cash gifts should go to friends and family; at what age your children might benefit from your assets.
Furthermore, if there is no Will then the Intestacy Rules are very arbitrary. Let me give you some examples:-
(a) If a husband dies leaving his wife and children, his wife will not necessarily inherit the entirety of his estate. She will inherit the first £250,000 plus joint assets and chattels and all the rest will be shared, as to half to her in a life interest trust and as to half to the children. In certain circumstances the wife might not even inherit the house.
(b) If a young married couple tragically die together without children and neither the husband’s family or the wife’s family with inherit everything depending on who has died first. The law generally assumes that the elder dies first and the younger second unless medical evidence can be brought to prove otherwise. Therefore one or other of the families will lose out.
(c) If somebody dies without many living relatives then there can be complex family tree issues to sort out which can only increase costs and see assets being split between a myriad of distant relatives.

There is danger here of sounding like a pompous lawyer. Regrettably however in the writer’s experience the answer is “no”. In his 20 odd years of dealing with Wills it is surprising how often he has found there to be problems with home made Wills with ambiguities causing unintended consequences. It is much better to pay a professional a relatively modest fee to put a professional Will in place.
To give an example the writer once dealt with an estate of an elderly lady who had died leaving a home made Will intending to leave everything to her partner. Unfortunately the Will had not been properly witnessed nor dated and therefore was not a Will. Instead of her partner of many years standing inheriting the estate the assets ended up being distributed between more than 30 distant relatives. A professional Will would have avoided:-
(a) The deceased’s wishes not being carried out and,
(b) Extensive costs being incurred in sorting the estate out.
When might I need a Trust?
There are a whole host of reasons why you might find it advantageous to use a Trust. In effect, a Trust is a legal concept where you are able to put assets into a place of safety. Let us give you some examples:-
(a) If you arrange to write life policies into a trust then on your death instead of the life policy money being part of your taxable estate, the money can be put into a place of safety for the benefit of your spouse or children, for instance.
(b) Similar arrangements can be made with pensions that have not yet been taken or death in service benefits.
(c) In cases where perhaps there is a second marriage, you may wish to benefit your surviving spouse but in such a way that after his or her death the assets are guaranteed to go to your own children.
(d) You might have infant children and you will wish the assets to be looked after for them until they are mature, not necessarily 18 but perhaps say, 21 or 25.
(e) You might have disabled children who you wish to benefit but in a way that will not make them vulnerable to third parties.
(f) Perhaps you might be concerned about the fact that your children are divorcing or in financial difficulty.
(g) There may be good Inheritance Tax reasons.

Trusts are really good vehicles where family wealth protection and/or Inheritance Tax planning is required.

Inheritance Tax is the tax that is paid when we die. If an individual dies and if they are worth more than £325,000 then in principle Inheritance Tax becomes payable at the rate of 40% on the amount by which a deceased person’s estate exceeds £325,000. In effect, for married couples that figure is £650,000.

There are many strategies available to reduce Inheritance Tax. We will be very happy to discuss them with you perhaps at the time you are making Wills or separately.