With thanks to Julie Man, Head of Private Wealth and Partner at Mundays LLP
‘Seize the day boys, make your lives extraordinary!’ exclaimed Robin William’s character in the film ‘Dead Poets Society’. Whilst this is sage advice and we should indeed make the most of our lives, Robin Williams’ untimely death reminds us to consider the consequences of death.
Too many people still die without making a Will. With increasingly complex family arrangements, children can often miss out on inheritance that they would naturally expect to receive, or become entangled in unpleasant disputes with step-parents.
The intestacy rules, which operate when someone dies without a Will, and which came into force in 2014 could disadvantage the children of a person who has died, in favour of the surviving wife or husband. Under the old rules, if you died leaving a wife, husband or civil partner, and children, the surviving partner would benefit from the first £250,000 of your assets. The remainder, if any, was divided into two shares. One half would go to your children when they are 18 years old. The other half was held on trust for the partner for their lifetime, so that they would receive the income from any investments or live rent free in any property, but it would then pass to the children on their death. However now, whilst the surviving partner still benefits from the first £250,000 of the assets, they also receive half of the remainder absolutely as opposed to a life interest, which means that the children will ultimately receive a lesser share than they would have done before the rules changed.
Noticeably, the new rules do not benefit couples who are not married or in a civil partnership. So then we are in an uncomfortable situation where there are many couples who are living together, have had children together and are raising a family together. Whilst their lives are intrinsically bound, they just have not got round to putting the ring on the finger or do not believe that a piece of paper in the form of a marriage certificate is needed to prove their commitment.
With the hectic pace of modern life and many of us juggling work and family commitments making a Will does not necessarily feature highly on our list. However a failure to make a Will can have many unwanted consequences on the lives of our loved ones that we leave behind, particularly young children. Planning ahead must therefore be a priority for any parent.
Who, for example, should be responsible for looking after the children if both parents die and the children are still young? How should the children be brought up and educated? These are all important questions but, if say both parents die ‘intestate’ (i.e. without making a Will), crucially they will have no say on these issues and it is the Court that will need to decide on the issue of guardianship. This can be a protracted process and the decision of the Court may not ultimately reflect the wishes of the parents. Would it not be better for you to take control and choose the people who have similar views to you on bringing up your children? After all they will have responsibility for what is your most ‘precious asset’.
Any parent with ‘parental responsibility’ can appoint a legal guardian for their minor child in their Will. In most cases the appointment of the guardian will only become effective once both parents die as the surviving parent is already likely to have parental responsibility for the child. However not all parents will necessarily have parental responsibility and it may even be that another person, perhaps someone who has played a greater role in the child’s life, would be a more suitable appointment. Further complications can occur where parents are divorced or separated, or if there is a residence order in favour of one parent.
Your children’s guardians will also require financial resources to ensure that any children in their care can be looked after and brought up in line with your wishes. Dying without a Will means a loss of control as to how your estate passes and this could lead to your children receiving a lesser amount than you may have expected. Depending on your circumstances, the children would not necessarily inherit the whole of your estate if you die without a Will. Furthermore the rules provide that the children would inherit the assets at the age of 18. So, let me ask, ‘Would your children be financially mature enough to deal with an unrestricted large amount of money at 18?’ Holidays, sports cars and designer clothes may not be what you had in mind as the ultimate destination for your hard earned cash!
Making a Will gives you control over how your assets pass. It enables you to pass your estate to your children in the proportions that you want and at the age that you feel is most appropriate. It is common for parents to leave their estates on trust for minor children on reaching 21 years old. But serious thought does need to be given to what is an appropriate age. At 21 they may be expecting to graduate from university but have not yet entered working life and experienced earning money themselves. Would they have an incentive to work if they had expectations of what, in their eyes, was a large inheritance to spend, when realistically those sums can quite quickly be dissipated and may not last them a lifetime. Or perhaps 25 years old is a better age to ensure that they have sufficient life experience to deal with receiving a larger sum of money. However, consideration should also be given to the possibility that they could be in a bad relationship or get married young with the marriage heading towards divorce. Is your hard earned cash potentially financing a divorce settlement?
Leaving your estate to your children beyond the age of 18 can give rise to additional inheritance tax charges, and therefore other more tax-efficient trust structures should be considered. What is the right age? Do you have a crystal ball to look into the future? Or are you just relying on the hope that when your children reach a certain age all will be well in the garden? Trusts in wills can be considered to assist with asset protection issues, for example, a possible divorce, drug or alcohol reliance problems.
Whilst some of the issues considered above will require careful thought, drawing up a Will does not have to be a daunting process. We have seen many disputes arise out of situations where no Will has been made, or where old Wills have not been updated and have not deal fairly with those left behind. Such additional stress and expense can be avoided if you make sure you have a Will put in place which will deal with the complexities of your particular family situation. A solicitor can help you get your affairs in order so that your children’s’ future is safeguarded no matter what the future has in store. The cost of making a Will is a small price to pay compared with the possible costs if a dispute arises after the death. But then it is too late.
With thanks to Julie Man is the Head of Private Wealth and Partner at Mundays LLP of Cedar House, 78 Portsmouth Road, Cobham, Surrey, KT11 1AN
Telephone: 01932 590643 Email: firstname.lastname@example.org