Jessica Bown
AUTHOR Jessica Bown| CREATED 20 Jan 2016

The importance of a will

As much as we might not want to think about it, we are all going to die one day. We all know we should probably make a will but most of us never get round to it – it is estimated that 7 out of 10 people die without leaving one.

What does a will do?

Making a will gives you peace of mind that your wishes will be respected after you die and, by making those wishes clear, you can save your loved ones any additional stress at what is likely to be a difficult time.

A will allows you to:

  • Specify exactly how you want to divide up your assets, including any property, savings, business interests, personal effects and even pets (known in legal terms as your ‘estate’).
  • Appoint a guardian to care for your children as well as make specific financial provisions to help them do so (otherwise, it will be up to the courts to decide who looks after any children under 18 who are left without a parent).
  • Potentially reduce or eliminate the amount of inheritance tax that will need to be paid on your estate – see below for more detail.

What happens if you don’t make a will?

In England or Wales, if you die without a valid will, laws known as the Intestacy Rules will determine how your estate is shared out. Importantly, only spouses or civil partners and certain blood relatives can inherit under these rules – unmarried partners who are not in a civil partnership cannot benefit, nor can relations by marriage or close friends, even if there are no qualifying blood relatives (in which case your estate will pass to the Crown).

If you are survived by a spouse/civil partner and children, then all your personal possessions and an amount of up to £250,000 will be left to your surviving spouse/civil partner. The rest of your estate will be held in a trust where your spouse/civil partner has what is called a life interest, i.e. they are entitled to the income from the trust for the rest of their life. The remaining capital is held for your children. It may be that assets need to be sold (for example, the family house) to satisfy the surviving spouse/civil partner’s income entitlement.

Not having a will can mean lengthy delays in distributing your assets, in some cases for years, which could leave your nearest and dearest in a difficult financial position, depending on your situation.

Life changes and wills

Family lives are often now more complicated with the rate of divorce (118,140 were granted in 2012 alone according to the Office of National Statistics), second marriages and second families on the rise. In such cases, it is even more important to have a suitable will in place.

It is also essential you remember to review your will, especially when life changes occur. Life events such as a second marriage will revoke any previous wills and a divorce will cancel any benefit to a former spouse, unless the will specifically states that divorce should not affect the entitlement.

Consider the fictitious example of Jonathan and Heather who have just married and for both it is their second marriage. They each have children from their first marriages - Jonathan has a son, Jason, and Heather has a son, James. Jonathan and Heather have also just had a baby daughter, Emma.

If Jonathan dies in England or Wales without leaving a will, then the bulk of his estate will be split firstly to his wife Heather, and then to his children Jason and Emma. This may be exactly what Jonathan would want. However, if Jonathan and Heather die together, and it is not possible to ascertain who died first, then as Heather is younger than Jonathan, it is likely that the bulk of Jonathan’s estate would pass to Heather and then her estate would be distributed amongst her children – possibly leaving Jonathan’s son Jason with little or no inheritance.

However, if Jonathan and Heather die together and Jonathan has left a will specifying, for example, 75% of his estate should be held on trust for his children (Emma and Jason) and 25% of his estate should be held for his wife Heather, then only 25% would pass to Heather’s heirs.

Minimise inheritance tax

Currently, if you leave behind an estate worth more than £325,000, inheritance tax (IHT) is levied at hefty 40% of anything above this threshold. If this is likely to apply to you, a will can help you reduce the potential tax burden on your beneficiaries.

One way is to leave everything to your spouse or civil partner who will not be liable for IHT regardless of the size of your estate. An additional benefit of doing so is that they will inherit any part of your IHT allowance not used on your death, which means that if you left them everything, they can then leave up to £650,000 on their death before IHT is payable.

Another way is to give money to charity. Any money you leave to charity is not taxed and if you leave more than 10% of your estate to charity, any IHT payable on the remainder will be charged at a reduced rate of 36%.

Consider professional advice

Although you are not obliged to use a solicitor to make a will, it may be wise to seek professional advice to ensure your will is both valid and will be interpreted in the way you intend. This is especially true if you have complex personal circumstances. You may wish to consult an independent financial adviser or tax-planning specialist to explore the most suitable options for reducing inheritance tax, remembering that tax arrangements may change in the future. If you don’t yet have a financial adviser but are interested in finding one then you can find out more here.


Jessica Bown

Financial journalist Freelance

Jessica Bown is a freelance financial journalist with more than 10 years experience. She writes regularly for The Sunday Times and the Daily Express, as well as a variety of other newspapers, websites and magazines.