The dangers of DIY wills
This article first appeared in The Money Pages.
Contemplating mortality and planning ahead for death is not appealing to most people. There is often a deep-seated fear or unease which surrounds the act of preparing a will and getting one’s affairs in order.
It’s no wonder, therefore, that some people prefer to take matters into their own hands by writing their own wills, stashing them away at home and forgetting about them. The advent of electronic wills has no doubt increased the appetite for this kind of DIY approach particularly since online providers can produce a will in just a few easy steps for a modest fee. When compared with professional costs, a price tag of £40.00 or even less will be far easier to swallow, but at what cost to your estate?
Some might argue that if your affairs are very straightforward then preparing your own will makes sense. The difficulty with this reasoning is that most people would consider their affairs to be “straightforward”. The reality is that a lay person is unlikely to spot the quirks or grey areas that will be identified by a professional quickly.
For example, gifts of specific assets which are not drafted to accommodate a change in circumstances may leave an intended beneficiary with nothing. Confusion may arise over which assets form the subject of a gift if they are not defined clearly; the consequence being beneficiaries receiving too much or too little.
Consulting a professional allows you to take stock of matters that might otherwise be glossed over. For younger couples with children in particular, this means facing up to the idea that their spouse or partner might remarry or meet a new partner in the event of their death, and perhaps have more children.
If you find yourself feeling concerned about preserving capital for your children to make sure it doesn’t end up in the hands of strangers, you’ll need to incorporate special provisions in your will. If you and your partner already have children from previous relationships, you ought to address what type of provision you would like to make for your partner and how to ring-fence assets for your children. These conversations can be awkward but are important for achieving peace of mind.
A professional can guide you through difficult scenarios and questions that might not occur to you when drafting your own will.
Professionally drafted wills can incorporate an element of tax planning by structuring gifts in a certain manner. Broadly speaking, inheritance tax is charged at a rate of 40% on the value of your estate which exceeds £325,000. A solicitor will be able to advise on the tax implications and reduce inheritance tax where possible by drafting a Will which maximises the available exemptions and reliefs. For example, if you have business interests you could be wasting valuable business property relief if your will does not structure gifts efficiently.
Whereas assets passing between spouses are exempt from inheritance tax, unmarried couples do not benefit from the same favourable tax status. If you are not married and you wish to leave assets to your partner then inheritance tax is an important consideration.
In some cases the inheritance tax bill may result in having to sell assets in order to pay the tax and/or raise funds for other beneficiaries in the estate; not necessarily what you have in mind for your partner. Grieving the loss of a life partner itself is deeply traumatic and unexpected financial consequences will exacerbate matters. A will should be drafted with this in mind.
Not everyone will know which assets can be covered by a will. Pensions are generally outside a person’s estate so any death benefits pass to individuals nominated under an expression of wish as opposed to a will. It is imperative that these arrangements are reviewed and kept up to date.
Special considerations apply to real estate. When instructed to prepare a will, a solicitor will undertake a Land Registry search to verify property ownership. This is particularly important where property is owned by more than one individual because property can be co-owned as joint tenants or as tenants in common; different succession rules apply to each type of ownership.
Under a joint tenancy each joint tenant owns the whole property such that when one joint tenant dies, the entire property passes automatically to the surviving joint tenant(s) irrespective of the terms of the deceased’s will. Conversely, tenants in common own property in distinct shares capable of passing under the terms of a will or in accordance with the intestacy rules if the deceased dies without leaving a valid will.
If you own a holiday home or other property overseas it is important to bear in mind that some countries impose laws (known as forced heirship rules) which dictate who must inherit your estate and in what proportions. Often it will be necessary to prepare a separate foreign will covering the holiday home but this will need to be expressed in such a way that it does not revoke an English will, so input from lawyers in both countries will generally be required.
Getting the contents right and ensuring the will reflects your wishes is one matter; executing it correctly is another. Among the strict rules that must be observed includes the requirement for two independent adult witnesses to be present at the time of signature. Furthermore, witnesses must be chosen carefully as if a person who benefits under the will (or their spouse) is also a witness, that person will be prevented from benefitting under the Will. Dying without a valid will in place can leave things in a real mess for families, not least for unmarried couples who have no automatic right to inherit under the intestacy rules.
Drafting your own will is risky business. While the contents may appear to be an accurate reflection of your testamentary wishes on paper, the reality could be quite different. Ultimately any upfront saving afforded by a DIY approach could result in costly mistakes, jeopardising the financial and emotional wellbeing of your loved ones.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.