Every year we lecture to hundreds of investors and businessmen about tax structuring and managing family wealth. A key priority is building a diversified portfolio of family assets to benefit future generations. It therefore amazes us that usually more than half those attending do not have a will or have not reviewed their will in recent years. Some of the audience would have written a will which is surpassed by important life events such as marriage, new born children, divorce, starting a business, and substantial increased wealth. We also remind our audiences that weddings and funerals always seem to bring out family differences and a will can help protect against such disputes.
A will lets you choose who will inherit what you own. If you die intestate (without a will), the rules of intestacy will determine what happens to your assets. Given intestacy law dates to 1925, it doesn’t do much to protect modern families. For example, unmarried partners, friends and charities aren’t provided for. Everything does not always go to your spouse, for example: if you’re not married, your partner may lose out in favour of blood relatives.
Your will would appoint executors to manage your estate. These are generally trusted individuals although a trusted professional may also be appointed. Executors may also act as trustees of a trust set up by the will (and if there are any underage beneficiaries then a trust would certainly come into existence). Without a will there is no such control over who administers your estate. In addition, if you don’t leave a will then the people who administer your estate (known as ‘administrators’) may have to trace relatives to ensure that they have paid out your estate to the correct people and have not left anybody out who should have been a beneficiary. This costs your estate money and the administrators may have to employ professionals to trace beneficiaries, as well as obtaining insurance to cover the possibility that they have failed to include a beneficiary who may come forward with a future claim on your estate.
If you have minor children, a will allows you to make provision for their care by appointing guardians. Obviously, the caring of the children has an associated costs and it may be that you can make provision for assisting the financial burden of care. It is unlikely that you will want to pass asserts directly to the child or even the guardian. Children would receive any inheritance outright at age 18 under intestacy. A will allows you to specify that they will inherit when they are slightly older, e.g. 21. It may also be appropriate to set up a discretionary trust in the will. A discretionary trust would give more control over how and when the inheritance is utilised. If you have life insurance, it may be that the policy is written so the benefit passes to a specifically drafted trust.
A will can ensure that assets are kept within the family and its future generations. The way assets are passed down generations may be of importance – some might not wish to include the spouse and children of say a second marriage. It may be that you wish to protect from a beneficiary going bankrupt or divorcing. Similarly, you may wish to protect some of your assets from being used to pay care fees for the surviving spouse.
Your will can also include details for your funeral, for example whether there is a free bar or not!
Dying without a will could leave your family with a financial mess to deal with at a time when they are probably not best placed to deal with it.