Making or Reviewing Your Will

WHAT HAPPENS WITHOUT A WILL?

Without a Will, a person’s estate passes according to a set of statutory rules, known as the “intestacy” rules.  Under these intestacy rules, the “wrong” - or unexpected - people might benefit from the estate.  The person leaving the assets has no control.  Even if the “right” people benefit, they may not benefit in the desired proportions or in the most tax efficient way, and there may be considerable inconvenience or family turmoil.  In particular, a spouse does not necessarily inherit the whole of their husband or wife’s estate, and an unmarried partner has no rights under the intestacy rules at all.

CHANGES IN YOUR PERSONAL CIRCUMSTANCES

We recommend making or reviewing a Will whenever your personal circumstances have changed.  This may be a change:

• In financial circumstances.  Should your beneficiaries be altered?  Do asset protection and/or tax planning strategies need to be considered?
• Relating to children or grandchildren.  Are they provided for financially and, if so, how?  What about guardians?  For adult children entering into their own relationships, will wealth stay within the family?
• On separation and/or divorce.  A spouse can benefit under a Will/intestacy until the Decree Absolute (the Court’s final order officially ending a marriage, which can take some time).
• On marriage.  A Will is revoked by marriage (unless it is expressly made with that marriage in mind).

CHANGES IN THE LEGISLATION

Changes in the law can affect the suitability and tax efficiency of your Will.  There are often changes in law – for example, the introduction of the transferable nil rate band (2007) and a 36% reduced rate of inheritance tax where 10% of your estate is left to charity (2012).  Recently, there have been a couple of significant legislative changes which you may have heard about that make it important to revisit your Will:

1. Residence Nil Rate Band

Applicable to deaths on or after 6 April 2017, the Residence Nil Rate Band (“RNRB”) is a proposed additional nil rate band available to set against a deceased person’s residence (or the equivalent sale proceeds) worth £100,000 per person in 2017/18 and rising to £175,000 per person by 2021/22.

The availability of the RNRB is restricted by various conditions which must be met before the RNRB can be claimed:

• Your residence must be left to “direct descendants” (i.e. children, grandchildren etc.), which means other family members (such as siblings or nephews/nieces) and non-family members cannot benefit from the RNRB.
• The beneficiaries under your Will must either inherit outright or from certain specified types of trust, otherwise the RNRB could be lost.
• If your net estate (after the deduction of liabilities but before reliefs and exemptions) exceeds £2 million, there is a tapered withdrawal of the RNRB at a rate of £1 for every £2 over this threshold.

These restrictions may mean that the structure of your Will should be altered to maximise the benefits of the RNRB - there is a potential inheritance tax saving of £70,000 per person by 2021/22.

2. EU Succession Regulation (“Brussels IV”)

The EU Succession Regulation (more commonly referred to as “Brussels IV”) will be relevant if you own property situated in an EU member state.  A number of countries (e.g. France, Spain, Italy) restrict the ability of an individual to decide how their assets should be distributed after their death (known as “forced heirship” rules), whereas in the UK we have complete freedom over who should inherit our estate.

Brussels IV is designed to address the problems caused by EU jurisdictions applying their own differing laws when dealing with succession of assets and make it easier for individuals to decide which law they want to apply to their assets situated in EU member states.

Your Will (and any foreign Will) should be reviewed to assess the impact of Brussels IV and whether changes should be made.   For example, certain individuals can elect for the law of England and Wales to apply to their entire EU estate – this small change should disapply the “forced heirship” rules, simplify the administration of the estate and may mean that it is no longer necessary to have more than one Will.

Please note that the information in this leaflet is necessarily brief and is not intended to be an exhaustive statement of the law or relied upon as legal advice. It is essential that professional advice is sought before any decision is taken.

© Stevens & Bolton LLP Summer 2016