No matter how young or old you are, writing a will is incredibly important, as it determines who will receive the contents of your estate once you have passed away. However, choosing what to do with your assets can be very tricky, which is why these tips from probate solicitors in Epsom will definitely come in handy.
– What happens without a will?
Without a will, your property, savings and pension will go to your married or civil partner if there is one and, if the value is over £250,000, the children will acquire shares of the asset too. If there are no partners or children, other relatives may inherit the estate; however, without any surviving family, the assets will pass to the Crown.
– What to think about when writing a will?
While deciding who to leave your belongings to may be simple for you. There are some things that are worth thinking about before finalising it in your will.
For instance, while married and civil partners do not have to pay inheritance tax (IHT), other relatives do. So if you want your children to acquire some shares of your wealth, it is worth looking at whether this will exceed the inheritance tax threshold, called the nil-rate band.
This stands at £325,000 until 2021, and anything acquired that exceeds this amount is taxed at 40 per cent.
Children or grandchildren have an additional allowance of £150,000 for 2019/2020 and £175,000 for 2020/21, meaning anyone inheriting up to £475,000 in this tax year will be exempt from paying the duty. If you think you are likely to leave more than this – taking into account the value of your home, jewellery, personal items, shares and savings – it is worth considering ways to reduce the amount you leave in your will.
– Leaving assets while reducing IHT
This does not mean you have to massively cut down on the assets you leave to your loved ones. For instance, instead of sitting on the money until you pass away, you can start giving it away during your lifetime.
The government allows a £3,000 Annual Gift Exemption, which means you can give relatives money up to this amount every year without them being subject to paying IHT. However, it is important you do not overspend, as this would result in them having to pay the levy if you die within seven years of making the gift.
Another option is leaving your assets in trust. This means they no longer belong to you but you can stipulate conditions that control when your relatives can access them.
Pensions are also not subject to IHT, so you might want to increase the amount you pay into your pension pot so your family can access this cash tax-free after your death, as long as you do not die within two years of setting up a new retirement plan.
– Use it for care
While it is tempting to lock away money for your loved ones, it is important you leave enough for you to have a comfortable life too. Many elderly people need professional care as they get older, yet figures from Key revealed just 21 per cent of over-55s in the UK have made financial provisions for care.
Residential homes cost around £30,000 per year while nursing facilities can be around £40,000, so even the 13 per cent who believe they can fund it themselves might not understand how much money they will actually need access to.
It is essential you consider these expenses when writing your will, so you have enough savings to cover the cost of old age as well as being able to leave some assets to your family.