Why Should You Make A Will?
Gordon Bowley has practised as a family solicitor for over thirty years. This is his second book aimed at helping lay-people reduce or avoid entirely the exorbitant cost of consulting a solicitor.
IT IS YOUR MONEY AND YOU WANT TO DECIDE WHO SHALL HAVE IT
It is self-evident that after death you can no longer personally manage, control or direct the destination of the assets you have so painstakingly acquired during your life or who is to benefit from what remains of them. Neither is it possible for you personally to have any direct input in the upbringing of your children.
If on death, which comes to us all and sometimes when we least expect it, you leave a valid will, it is possible at least indirectly to influence such matters. If you leave no valid will you are said to die intestate and these matters are decided in the main by the state, which is what few would wish and which sometimes has disastrous consequences. By making a will you will have more control over these and other matters and the flexibility which a will gives will bring peace of mind as to what will happen after your death.
The laws of intestacy do not rank highly on the political agenda and were mostly enacted in 1925. Only occasional and piecemeal revisions have been made since that date. The result is that they are out of date and unsuitable for British society in the twenty-first century in which marriage to a lifetime partner is no longer the norm.
In brief, in the case of death without a valid will, who inherits and deals with the winding up of what you leave (known as your estate) depends upon the size of your estate and what relatives, if any, survive you, and these are both matters of chance. If no relatives within a prescribed degree survive you, the Crown or the Duchies of Lancaster or Cornwall will inherit and wind up your estate, which is something that most people would wish to avoid. Moreover, it is more likely that it will be possible to trace those entitled under your will than to trace perhaps long-lost relatives entitled under the laws of intestacy.
Other problems can arise if you do not leave a valid will:
- If the value of your home is high in proportion to the total value of your estate and children or sometimes some other relatives survive you, your spouse or partner might be compelled to sell the family home to pay out the children or other relatives. Similarly if your spouse or partner dies intestate, you might be compelled to sell your home or other assets to pay out the entitlement of in-laws or your partner’s relatives who might be people you tolerate rather than like. If you or your spouse or partner die intestate, you cannot rely upon your children, relatives or in-laws, who might have the kindest of intentions towards you, permitting your spouse/ partner or yourself (as the case may be) to remain in the family home; their hands may be forced by matrimonial or business problems and they may have no alternative but to compel you to sell property and claim their share of the estate immediately.
- If your marriage or civil partnership has broken down but no decree absolute of annulment or divorce has been pronounced at the date of your death, then under the laws of intestacy or under a previous will which you may not have revoked, depending upon the circumstances of your particular case, your surviving civil partner or spouse might inherit the whole or a share of your estate which is totally inconsistent with your wishes.
- If you are a person with a cohabitee (partner) with whom you have set up home and you die intestate, your partner has no automatic right to inherit anything from you unless your partnership is a civil partnership and it has been registered under the Civil Partnership Act 2004 and to inherit your cohabitee must make a prompt application to, and rely upon the tender mercies of, a court.
DO YOU REALLY HAVE NOTHING TO LEAVE BUT YOUR DEBTS?
This may seem to be true at first sight, but not upon further reflection. In a financial sense, you are probably worth more when you are dead than when you are alive; for example, if you are negligently killed in an accident your estate might be entitled to a very large sum by way of damages. If you die within a few years of taking out a life or endowment policy, your estate or the beneficiaries of that policy would certainly receive more than you would have received by surrendering it during your lifetime. Pension schemes may provide substantial death in service provisions either by way of lump sum or pension for those who survive you. Perhaps you own a house and there is a mortgage but the mortgage debt is covered by insurance?
ARE YOU TOO YOUNG AND NOT READY TO DIE?
You might be young, fit and active and not be ready to die but the choice is not yours. Accidents do happen: young people are frequently killed in motor accidents for which they are not responsible and fatal diseases do not only strike down the elderly. In the real world it is not possible to say, ‘It will not happen to me’ and you will not be given a specific period of notice in advance as to when you must go; you will be leaving life and not employment.
IF YOU HAVE TO GO, YOU SHOULD GO YOUR WAY (OR TRY TO)
The right to determine how to dispose of your body after your death belongs to your executor if you make a will or to the next of kin if you do not make a will. Legally your personal wishes may be ignored, but in practice they are more likely to come to light and be carried out if you record them in a will.
THEY ARE YOUR CHILDREN AND YOU SHOULD DECIDE WHO SHALL BRING THEM UP
If you die without making proper provision for the appointment of a guardian for any children you have who are under the age of 18, they could be brought up by people you consider to be totally unsuitable, and if you are their only surviving parent, the children could even be taken into care and the family split up. You cannot even rely upon your spouse or partner to care for them; he or she could die in or as the result of the same or a subsequent accident or die of an illness while they are still under age. If you make a will you can choose your children’s guardian and who is to bring them up, as long as you do not try to displace a guardian appointed by a court, the children’s mother or a father who was married to you at the time of their birth or has been registered in the United Kingdom as the father or a person who has been officially granted guardianship by you. However, a provision in a will can even displace such a mother or father if when you die the children have been living with you under a residence order made by a court.
The ability to appoint a guardian by will is especially important to unmarried mothers because on the death of an unmarried mother, her children’s father does not necessarily have the legal powers of a parent or become their guardian.
HASN’T THE GOVERNMENT TAKEN ENOUGH TAX FROM YOU IN YOUR LIFETIME?
If you consider that you have been heavily taxed so far and paid more than your fair share or that you are not rich enough to pay death duties, then you (or your loved ones) may have a very unpleasant surprise. In today’s world if you own your house and have a mortgage protection, endowment or life policy, you could well find that you have an inheritance tax problem. Remember that the value of these items and anything else which you own will be added together and that if the total is over the exemption limit (sometimes known as the nil rate band and which at the present date is £300,000) the excess will be taxed at a full 40 per cent! It is true that what your civil partner or spouse inherits from you is exempt from inheritance tax on your death, but that does not necessarily help in that it will only be added to whatever your spouse or partner owns and compound the problem when he or she dies. Moreover, the exemption does not apply to cohabitees unless they have a registered civil partnership. By making a will and carefully considering its provisions you may be able to arrange matters so that more of your estate is inherited by those you care for and less by the state.
SPARING YOUR NEXT OF KIN EXTRA PAIN
Your next of kin might be just too upset to deal with your business affairs when you die or you might not wish her to handle your business.
It is only natural that those close to you will be upset when you die and having to repeatedly deal with papers relating to you will only make matters worse.
Your next of kin may not have sufficient business knowledge or ability to handle your affairs, and if they are complicated you might wish to entrust them to a professional executor or knowledgeable and experienced friend. If you have few close relatives and do not have contact with them, do you really wish a long-lost cousin to wind up your financial affairs for you after your death or would you prefer a trusted friend or business colleague to do it for you? Again on death you might wish to place your affairs in the hands of your principal beneficiaries or a combination of several of the above. Making a will gives you the flexibility in these matters which anyone dying intestate does not have.
SOME MATTERS ARE REALLY URGENT
Executors derive their powers from the will itself and they come into effect at the moment the person who made it dies. If a valid will has not been made, no one has any legal power to act until someone (who is called an administrator and who is usually the next of kin) has been appointed to do so by a document called Letters of Administration issued by the High Court. The appointment takes some time. Delay can be disastrous if there are matters requiring urgent attention; for example, you may have been negligently killed in an accident and have a legal right to claim for damages which will fail if the claim is not made within specified time limits, or there might be a family dispute concerning the funeral arrangements or who is to make them.
WHAT HAPPENS IF YOU DIE WITHOUT A VALID WILL (IN GREATER DETAIL!)
If you die without making a will you are said to die intestate and your estate will be wound up and inherited according to intestacy law.
Who will administer your estate?
Unless your estate is under £5,000 before paying your funeral expenses and debts, or it consists entirely of property held in joint names as joint tenants (as to which see Chapter 3), it will be necessary for someone to be appointed as the administrator of your estate by the Probate Registry at the High Court and given powers to wind it up in accordance with intestacy law. This is done by the Registry granting Letters of Administration of the estate to the appropriate person. You have no right to decide who that person will be. The following people have the right to ask to be appointed and they are entitled in the order set out:
- 1.Your spouse or civil partner, or if he or she has survived you but dies before obtaining Letters of Administration of your estate, his or her personal representative.
- 2.Your children or other issue, i.e. children or grandchildren or other descendants.
- 3.Your father and mother.
- 4.Your brothers and sisters of the whole blood or their issue.
- 5.Your brothers and sisters of the half blood or their issue.
- 6.Your grandparents.
- 7.Your uncles and aunts of the whole blood or their issue.
- 8.Your uncles and aunts of the half blood or their issue.
- 9.The Crown.
- 10.Your creditors.
Only blood relations and adopted or illegitimate relatives count, not relatives by marriage. Same sex partners who have not registered their partnership under the Civil Partnership Act 2004 and different sex partners who are not married to each other have no right to administer their partner’s estate no matter how long they have been together.
Who will inherit your estate?
A few general points first.
Again, except for your spouse or civil partner, only blood relationships and adopted or illegitimate relatives count, not relations by marriage.
The law as to who will inherit your estate if you die intestate divides your relatives into groups or classes according to their relationship to you, e.g. children, siblings, grandparents, etc. All members of a given class inherit in equal shares. If a member of a class has died before you and leaves issue who survive you, the issue inherit equally between them the share which their predeceasing parent would have inherited had he survived you. There is a specific order in which the various classes inherit and if all members of a given class have died before you without leaving issue who survive you, the next class inherits. The words ‘child’ and ‘children’ are used to mean your immediate descendants (as opposed to grandchildren) and the word ‘issue’ is used to mean all your descendants. If those entitled to inherit are under the age of 18, the inheritance is held in trust for them until they either reach the age of 18 or enter into a registered civil partnership or marry under that age. If your civil partner or spouse does not survive you by 28 days your estate is distributed as if he or she had not survived you. Net estate means the estate after deducting all debts, liabilities, inheritance tax and funeral and testamentary expenses.
To decide who will be entitled to inherit your estate when you die it will be necessary to look for the first class and if there is no member of that class who survives you or predeceases you leaving issue who survive you, to move on to the next class.
The first person to have a claim on your estate will be your civil partner or surviving spouse and the amount to which he or she will be entitled will depend upon the size of the net estate and whether or not there are any surviving issue or certain other close relatives. If your spouse or registered civil partner survives, but for a period of less than 28 days beginning on the day on which you die, he or she is considered not to have survived you.
If you leave a surviving spouse or civil partner but no issue and no parent, brother or sister of the whole blood or issue of a brother or sister of the whole blood, your spouse or civil partner will inherit the entire estate.
If you leave a surviving spouse or civil partner and issue or any of the specified relatives, your spouse or civil partner will be entitled to your personal chattels, i.e. moveable items such as sporting trophies or motor car, but personal chattels does not include items used in any business, e.g. a delivery van.
Your spouse or civil partner is also entitled to be paid a fixed sum of money known as a statutory legacy out of your estate and interest on the statutory legacy at the rate of 6 per cent from the date of death until the administrator of your estate pays it to her.
If you are survived by issue your spouse’s or partner’s statutory legacy is £125,000. If you leave no surviving issue but leave a surviving parent, or a brother or sister of the whole blood or issue of a brother or sister of the whole blood who has died before you, the legacy is £200,000.
Your surviving spouse or civil partner will also be entitled to one half of what is known as ‘the residuary estate’, i.e. what remains of the net estate after deducting the personal chattels and the statutory legacy. If you also leave surviving issue, your civil partner or spouse will be entitled to the share of the residuary estate only during her lifetime, but if you leave no surviving issue, then your spouse or civil partner is entitled to the share for her use and benefit absolutely. When your spouse or partner is only entitled to the half share of the residuary estate for the remainder of her life, then because it has to be left for those who are entitled to inherit it after her death, she can only spend the income that share produces and cannot spend the capital sum represented by the share. Where your spouse or civil partner is entitled to the share for her own use and benefit absolutely she can, of course, dispose of both the capital and income as she wishes.
Your surviving spouse or civil partner is entitled to require your personal representative to use the remaining residuary estate to purchase her interest for life in the one half share of your residuary estate from her. If your home is freehold or leasehold with at least two years of the lease to run at the date of your death, your spouse or civil partner can also insist upon using her share of the residuary estate to buy the home, paying any difference in value in cash. To exercise either of these two rights your spouse or partner must give notice of her intention to do so to your personal representatives within a year of the issue of the grant of Letters of Administration of your estate. If your spouse or civil partner is your sole personal representative the notice should be given to The Senior Registrar of The Family Division of The High Court of Justice. In cases where the home
- is part of a building or agricultural estate contained in the residuary estate or
- is used in part or entirely as a hotel or lodging house or
- in part for other than domestic purposes
the right cannot be exercised unless a court is satisfied that it is not likely to diminish the value of the other assets in the residuary estate or make them more difficult to dispose of.
If you leave a surviving spouse or civil partner and issue, the issue will inherit one half of the residuary estate on your death and the other one half of the residuary estate after the death of your surviving spouse or partner.
If you leave a surviving spouse or civil partner but no issue, she will inherit one half of the residuary estate for her own use and benefit absolutely and the other one half share of the residuary estate is inherited by your parent if one survives you and if both survive you then by them in equal shares, or if no parent has survived, by your brothers or sisters of the whole blood and issue of deceased brothers and sisters of the whole blood, the issue of your deceased brothers or sisters inheriting equally between them the share which their deceased parent would have taken had he survived you.
If you leave no surviving spouse or civil partner but leave issue the issue inherit the net estate.
If you leave no surviving spouse or civil partner and leave no issue but leave a parent or parents who survive you, the net estate is inherited by your parent, and if both survive you, then by them equally.
If you leave no spouse, civil partner, issue or parent, the net estate is inherited by the following classes of people who are living at your death and in the following order so that if there is no one in a class living at the death the subsequent class inherit, namely your brothers and sisters of the whole blood, or if none, your brothers and sisters of the half blood, or if none, your grandparents, or if none, your uncles and aunts of the whole blood, or if none, your uncles and aunts of the half blood.
If you leave none of the above your estate goes to the Crown, the Duchy of Cornwall or the Duchy of Lancaster.
A person considered to be your spouse for the purposes of the laws of intestacy when once you have married them until a decree absolute (not a decree nisi) of divorce or nullity or a judicial separation (other than in the magistrates court) has been made in respect of the marriage and to be your civil partner from when the partnership is registered until it is dissolved.
Your children will only have a right to their inheritance under the above provisions when they attain the age of 18 or enter into a registered civil partnership or marry under that age, whichever happens first, but there are provisions for the administrator of the estate to use up to one half of a child’s potential share for the child’s benefit before the relevant event occurs.
‘Children’ does not include stepchildren under the law as to inheritance on intestacy. Adopted children inherit on intestacy from their adoptive parents but not from their natural parents.
For the purpose of inheritance, if you are an unmarried mother and you conceive a child artificially i.e. by fertilisation by a donor, as the result of treatment provided for you and the man together, the donor of the sperm is considered to be the father of the child; if you are married and not judicially separated and you conceive a child artificially, your husband is considered to be the father of the child, unless it is proved that he did not consent to the fertilisation. These rules do not apply to inheritance of a title or land which devolves with the title.
What will happen to your business?
Under the general law your executors, or your administrators if you do not make a will and die intestate, have power to carry on the business without restrictions on that power, only for the purpose of winding it up and that should be done within one year.
To do so might be impractical or economically disadvantageous. If they take longer than a year your personal representatives can be held liable in law for any debts and losses incurred. If you run or are likely to run a business and you make a will you can provide in the will that your executors shall have power to carry on the business either alone or in partnership and provide that they shall be entitled to be indemnified out of the business for any debts or liabilities reasonably incurred in so doing.