Whatever the family fortunes, your nearest and dearest will thank you for leaving a will
She led a colourful life, but Anna Nicole Smith is probably best remembered for the much-publicised court battle over the will of her late husband, J Howard Marshall. The busty blonde fought for more than a decade to make sure she received some of the nonagenarian oil billionaire's $1.6bn (£800m) fortune.
Perhaps Smith was lucky in having something to fight over. While not everyone has the riches of an oil baron to leave behind, millions of us never get round to the important task of making a last will and testament. The UK is one of the wealthiest countries in the world, but a recent survey from the insurer Standard Life suggests that some 50 per cent of adults have left no legally binding instructions for the distribution of their assets in the event of their death.
"Despite a will being one of the most important documents a person ever signs, half the UK population have no will and seem to favour the ostrich approach," says Julie Hutchinson, estate planning specialist at Standard Life.
By law, if you have no will, the so-called rules of intestacy automatically apply. This means that your spouse may not get everything when you die; and if you are not legally married or in a civil partnership, your other half could be left with nothing at all.
Should a husband and wife who have no children die without having drawn up wills, it is likely that all of the estate will pass to the family of the second partner to die, with nothing going to the family of the one who dies first. And if there is no family to speak of, the Treasury gets it all.
Alan Lakey of independent financial adviser Highclere Financial Services says a properly drafted will should not only cover the distribution of the estate but also deal with the guardianship of children and any trust arrangements that may be appropriate.
The do-it-yourself will-writing kits offered by the likes of Tesco may not be a substitute for having a will drawn up by a solicitor, particularly if you wish to appoint someone to handle your financial affairs in later life, should you become unable to cope. The simple enduring power of attorney, under which such provision used to be made, has now been discontinued and replaced by the more complex lasting power of attorney. Specialist legal advice is essential here.
Considering that, should you die intestate, you run the risk of your entire estate disappearing into government coffers, paying a legal consultant or financial adviser to draw up a will may not be a bad idea. As well as making sure your assets go to those you want to inherit them (and not to those you don't), a professionally drafted document will help to minimise any inheritance tax (IHT) and capital gains tax liabilities.
For many people, the main asset they wish to pass on to loved ones will be the family home. Despite rocketing property prices in the UK, the threshold at which IHT becomes payable has not kept pace with growth and currently stands at £300,000. Forty per cent of any part of an estate above this will go to the taxman. Considering that the average price of a detached house in London is £769,519, the bill facing those left behind could be huge. However, a solicitor or financial adviser specialising in this area could help you substantially reduce the amount of tax your heirs will have to pay.
Yet despite the obvious disadvantages of dying without a will, estate planning – of which a will is the basic tool – is still considered less important than planning a summer holiday.
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