Live webchat - everything you need to know about making a will - Weds 18 April 1-2pm

solidair

I made my will about 20 years ago. It's pretty straightforward - everything to Mr Solid and, if he's died, to be divided equally among our children (mine and ours). What circumstances mean you have to update a will or do they basically last for ever?

It is good practice to review your will say every 5 years. However it may be that no changes are necessary. Please note you do not need to make a fresh will if anyone named in your will changes name or address, providing you are still happy with any gift made to that person or wish their appointment as executor to continue. Equally it does not matter if your address has changed-or you have changed name as long as you can be identified as the maker of the will.

You should make a new will if you wish to change the value or type of gift to a beneficiary or to add new beneficiaries or exclude beneficiaries or to change the executors.

A valid will lasts until it is destroyed or superseded by a later will.

cheeriblegran

My grandchildren are currently very young and I want to make provision for them in my will but I am concerned that if they were to come into their inheritance too young (ie before I had had time to spend it, use it up in care costs etc!) they might use it unwisely - drink, drugs, a dangerous fast car etc. What is the best way to guard against this? Should I put it in trust and how easy is that? And at what age is it sensible to release the money? - I am thinking in their 20s rather than their teens.

There are basically two ways of dealing with this problem.

The first is to give an absolute gift but only when the grandchildren have reached an age at which you consider they may have developed some maturity with respect to money. This is a personal decision for you but 21 or 25 or 30 are popular ages to choose, with 25 being the most popular. It is a common view that 25 is not making beneficiaries wait too long for the legacy if you were to die while they were still young, but by that age it is reasonable to assume they will be old and wise enough to deal with the legacy sensibly.

Please note that if there is a very substantial legacy which is paid after the age of 18 then there could be inheritance tax payable on the legacy. In any event, any legacy due to be paid after the age of 18 would be held on trust by the trustees appointed in the will (or whoever was subsequently acting as trustees) from the date of your death until each beneficiary reached the stipulated age. The beneficiaries would be entitled to receive any interest paid on their legacy at 18.

Once the beneficiary reached the stipulated age, the legacy would be absolutely his or hers to spend or mis-spend as desired and as the maker of the will all your control over that legacy would end. This makes the role of the trustees simpler as there is a known date when the trust ends, ie when the youngest beneficiary reaches the required age, and the trustees are merely investing the money; making any tax returns and paying any interest on the investments to the beneficiaries from the age of 18 to when each inherits. The will for this type of arrangement is simple. You would appoint trustees (who are often the same people as the executors) and state the age at which the beneficiaries are to inherit. There are no complicated clauses to be included.

The second possibility is to set up a discretionary trust in your will with your grandchildren and other as potential beneficiaries and leave it to the trustees to decide when and how much each grandchild should receive from the trust fund. You should also leave a letter of wishes to guide your trustees as to how to exercise their discretion.

This arrangement is more complicated than the first and involves the trustees in ongoing administration for however long the trust exists, including tax returns, investment decisions and at least annual reviews of whether payments should be made to beneficiaries. The drafting of the will which includes a discretionary trust is more complicated and you would need to take professional legal advice. The will would cost more than one without such a trust. This type of trust is flexible with no-one having an absolute entitlement to anything from your estate, rather each is a potential beneficiary and the trustees decides whether to make any payment to each and the amount and when. Obviously they would not make a payment or would delay it or would make any payment a small one, in the case of anyone who they thought would misuse the money.

flighty

Are there any simple ways to minimise inheritance tax or care tax liabilities?

Minimising Inheritance Tax (IHT)

Inheritance Tax (IHT) may be paid in certain circumstances during life as well as on death. This is a complex area of law and the following is a brief summary of options available to minimise the value of your estate on death for IHT purposes. It goes without saying that you must always ensure that you leave yourself sufficient money to live on for the rest of your life and to have a reserve for unexpected expenses, and not merely concentrate on saving future IHT liabilities!

You can reduce the value of your estate for IHT using any one or more of the following. Also, please bear in mind that if you are married or in a registered civil partnership and gift some or all of your estate to your surviving spouse/civil partner, any unused partner of your nil rate band threshold for IHT purposes (currently £325,000 net estate) will be transferred for use on the death of the survivor using the IHT nil rate band then in force.

a. Small Gifts Exemption
You can make any number of gifts of up to £250 per tax year but only one gift per person

b. Annual Exemption
In addition, you can make a gift or total gifts of up to £3,000 per tax year and you can use any unused part of the previous year’s Annual Exemption, but you cannot go back any further. You cannot combine the Small Gifts Exemption and the Annual Exemption and give say, £3,250 to a single person

c. Potentially Exempt Transfer
A lifetime gift of any amount is exempt from IHT during life (except for certain gifts into trusts) and is also exempt on your death if you survive for at least 7 years after making the gift. You must not retain any benefit in the gift (or if you do, you must pay a full market rate for the benefit)

d. Normal Expenditure out of Income
You can give regular sums out of your income which are exempt from IHT providing you have sufficient income after the payments to maintain your usual lifestyle, ie they cannot be deemed to be payments from your savings. The regular gifts could be to different beneficiaries.

e. Gifts to Charities etc
As you are aware, this is hot political potato at the moment! However, any gifts to charities etc are exempt from IHT. This includes gifts made during your lifetime and in your will.

There are also certain other exemptions such as gifts between spouses/registered civil partners (providing both are domiciled in UK); gifts in consideration of marriage (wedding presents); Business Property Relief and Agricultural Property relief; gifts to heritage property and political parties and for public benefit.

It is a good idea to keep a record of any gifts so there is a clear record for your executors after your death and the executors can easily claim the appropriate IHT exemptions.

Minimising Care Fees

Many people fear having to finance many years in expensive residential care, resulting in there being little for them to pass on to beneficiaries on their eventual death. Whilst wishing to minimise the financial costs should you ever be in this situation is very understandable, you need to be aware that some of the schemes to minimise your assets which can be used to pay for care fees may not be effective. Even if they are, you may not have the same range of choice of care home if your Local Authority is funding it because it will have limits on the sums it can pay and many care homes charge more than the Local authority’s maximum.

The rules are quite different outside England and Wales and the figures are slightly different in Wales. I set out the position in England only.

The Dilnot Report published last summer proposed a cap recommended at £35,000 as the maximum anyone would pay towards care fees, no matter how long they remained in care. However there are currently no moves to implement any changes. Under the current system, the Local Authority assesses your capital and income when you enter a care home to live there permanently. The value of your home is only taken in to account if there is no dependant relative sharing the property with you. You are responsible for paying all your care fees if your capital and income is in excess of £23,250 and you pay a proportion where your capital and income is between £23,250 & £14,250.

Property is counted as yours if it is held in your sole name, or your share of any jointly owned property. There are various schemes being marketed at present purportedly to avoid or minimise care fees by placing your home in trust. Such schemes may be effective but you need to be aware that if the sole or primary reason for the person placing the property into trust was to minimise or avoid care fees, there is a risk that the Local Authority will challenge the trust under the Deprivation of Assets Rules in the Charging for Residential Accommodation Guide.

flighty

I probably should have added there that I don't have serious wealth, but my partner and I do own a house in the home counties which is worth around £500,000. I know of people who have passed on their husband or wife's inheritance tax allowance, to double it up by the time the children come to inherit, but I don't know how to do this.

There was a change in the rules on Inheritance Tax (IHT) between spouse and registered civil partners which took effect from 9 October 2007. Prior to that date, anything inherited from one spouse (and since 5 December 2005 registered civil partners) to the survivor was exempt from Inheritance Tax by virtue of the Spouse Exemption. However, under the old rules the IHT threshold of the first to die was lost. It was therefore common practice for solicitors and professional will writers to include in the wills of spouses/registered civil partners nil rate band discretionary trusts which were a quite complicated way of preserving the nil rate band for IHT as well as the spouse exemption for the survivor.

The good news is that such trusts are no longer required in wills for this purpose. The new rules and IHT forms have been amended so that on the second death any unused part of the nil rate band of the first to die is transferred to the estate of the second to die, and the good news is that the IHT rates used are those in force at the date of the second death, even if it occurred many years after the first death when the nil rate band was much lower.

Please note that the transferrable nil rate band only applies on the second death and cannot be used during the lifetime of either spouse/registered civil partner. Also, it can only be claimed once even if the deceased has survived more than one spouse/registered civil partner.

glassortwo

Hi Hazel,

Welcome to Gransnet.

I am 56, my Husband and I have talked for years about making a will but have never made the push to actually go and get it sorted.

My apologies this will be a little long winded.....

We own a farmhouse which we are in the middle of renovating and are living with Daughter, Son in Law and Grandchildren while we do this. When it is finished they are moving in with us and all running costs will be split between Daughter and Myself. In normal circumstances we would leave our home between our Son and Daughter but because of this arrangement I feel that if we dont die for a lot of years (I hope)my Daughter will be paying towards the living costs and feel it will be unfair to do a 50/50 split, would it be possible to leave the house to Daughter and leave any money to Son, as I dont want Daughter to be in the position that she will have to leave her family home in the case of our death.

I think you need to take independent legal advice on this matter, but here are some of my thoughts.

One way of dealing with this problem would be for the ownership of the farmhouse to be held by your daughter as well as you and your husband. You could hold as tenants in common, meaning that you would each own a share of the farmhouse and on the death of any of the co-owners, the deceased’s share would pass under the terms of the deceased’s will or intestacy if there was no valid will. This may be a good way of ensuring that your son and daughter would receive equal shares from the estates of you and your husband after your respective deaths, but your daughter would already own a share of the farmhouse to reflect her contributions to living costs.

Another way of tackling the problem would be as you suggested with the farmhouse being left to your daughter and money to your son. That assumes there will be sufficient assets to pass on a suitable legacy to your son and that it is possible to make the cash and farmhouse of roughly equal values.

You could also consider giving your daughter a right of occupation in the property after each of you and your husband have died so that she does not have to leave the house until certain conditions (which you would set out in your wills) have been met. This would mean that your daughter would not own any part of the property and it could be shared equally between her and your son. However, this would mean your son having to wait to realise his share of the farmhouse.

glassortwo

Sorry me again...

Or would I be better to put a clause in stating that if the house if was sold (only if and when Daughter wanted to move) that a proportion of the sale would go to Son and any money split 50/50?

Strange position to be as not wanting to be seen to be making more of one than the other, but trying to be fair.

I think I’ve answered this query in my final paragraph as this could b e one of the conditions placed in your wills.

You would be well advised to instruct a Solicitor to carefully discuss what you are trying to achieve and the best means of doing so. It would also be a good idea to discuss matters with both your son and daughter once you have taken some advice so that you can explain your objectives to them and give them the chance to understand your thoughts.

This should help avoid any shocks after your deaths and lessen the risk of disputes arising.

glitzy

Mr glitzy and I live together but he has never got round to divorcing his wife (they separated 7 years ago). We have a joint mortgage but I am concerned that if he were today his wife and daughter would have a claim on his assets. Do I have to get him to divorce and marry me? Thanks

If your husband were to divorce, his wife may have a claim on his assets including a claim for maintenance for their daughter if she still needs financially maintaining and there are not adequate arrangements already in place for her. He may need to take legal advice on his current situation, bearing in mind that even if he decides not to divorce, his wife may choose to issue a divorce petition.

You do not mention if your partner has made a will and if so whether there is any provision for his wife and/or daughter. Providing he has made proper provision during his lifetime or alternatively in his will, it would be difficult for your partner’s wife or daughter to make a successful claim under the Inheritance (Provision for Families and Dependants) Act 1975 trying to order a payment to one or both of them. Please note that the fact that he has been separated for several years makes no difference to any legacy to his wife or daughter. If, however, he divorces, any legacy to his wife (but not to his daughter) would fail. The will would be read as if his ex-wife had predeceased him. Incidentally, on remarriage, the entire will is void and he would need to make a new will. Please see my reply to GrandmaH Thu 12-Apr-12 18:13:57.

[quote HazelJones]

glitzy

Mr glitzy and I live together but he has never got round to divorcing his wife (they separated 7 years ago). We have a joint mortgage but I am concerned that if he were today his wife and daughter would have a claim on his assets. Do I have to get him to divorce and marry me? Thanks

If your husband were to divorce, his wife may have a claim on his assets including a claim for maintenance for their daughter if she still needs financially maintaining and there are not adequate arrangements already in place for her. He may need to take legal advice on his current situation, bearing in mind that even if he decides not to divorce, his wife may choose to issue a divorce petition.

You do not mention if your partner has made a will and if so whether there is any provision for his wife and/or daughter. Providing he has made proper provision during his lifetime or alternatively in his will, it would be difficult for your partner’s wife or daughter to make a successful claim under the Inheritance (Provision for Families and Dependants) Act 1975 trying to order a payment to one or both of them. Please note that the fact that he has been separated for several years makes no difference to any legacy to his wife or daughter. If, however, he divorces, any legacy to his wife (but not to his daughter) would fail. The will would be read as if his ex-wife had predeceased him. Incidentally, on remarriage, the entire will is void and he would need to make a new will. Please see my reply to GrandmaH Thu 12-Apr-12 18:13:57.

If, however, he has not made a will and so died intestate, then any property which he owned in his sole name or as tenants in common with another would pass under the intestacy rules. Depending on the value of his estate, his wife and possibly his daughter would inherit but you would receive nothing as you are not his spouse or a blood relative and so not covered by the rules. You would then have to consider making a claim under the Inheritance (Provision for Families and Dependants) Act 1975. Please refer to my answer to Rosiemus Tue 10-Apr-12 10:24:41 for full details of the intestacy rules.

To summarise, marriage would bring you within the intestacy rules and so give you an automatic right to all or a share of your partner’s estate on death if he has no valid will, but the better solution would be to review his current will or to execute a will if he does not already have one.

redbird

What are the criteria for appointing an executor? Someone younger is a good start, presumably!

Please see my answer to rosiemus Tue 10-Apr-12 10:21:21 for my thoughts on the appointment of executors, but I agree with you that it is not a good idea to appoint executors who are likely to die before you. If nevertheless you wish to have an older executor, it is best to ensure you have younger substitute executors to take their place if necessary.