Why Make A Will?

If an individual does not make a will, the Laws of Intestacy will apply, giving control of how the deceased's estate will be distributed on death according to the law of the land.

If an individual would like to control what happens to his/her estate on death he or she needs to make a will and keep it up to date .

A properly drafted will can also be an important weapon in mitigating Inheritance Tax, although deeds of variation can be used after death to restructure an estate despite a will having been made.

If No Will is Made

Without a will, when a person dies he or she will be termed to die "intestate" and certain rules apply for the distribution of the estate.

In effect, if someone dies intestate they hand over control of the distribution of their estate to the particular laws of the country in which they live. The law is slightly different in Scotland from the rest of the U.K., but both sets of intestacy laws are shown in the following topics.

It could be that dying intestate may not be a large concern for an individual; in most cases, however, the unforeseen death of a potential inheritor could lead to a different inheritor benefiting from the death of the testator, which may not be desired.

The process of drawing up a will in the U.K., excluding Scotland will be looked at first. The legal definitions and complicated terms often used in drafting a will should no longer be a barrier to making a will. There are many companies now offering will writing services at reasonable prices and, of course, the family solicitor can also be used to draft a will.

An individual can also draft his own but this is not always recommended except in fairly straightforward estates as errors can be made by the inexperienced.

How to Make a Valid Will

The Wills Act of 1837, amended by the Wills Act of 1963, lays down English and Welsh law for wills. To make a valid will two formalities must be followed:

• it has to be in writing
• it has to be properly executed

The only exception to this is in the case of Privileged Wills which can be made verbally by soldiers on active service.

The terms of the will must be "reasonable", i.e. no strange conditions laid down for the inheritor, and the will must be signed by the person making the will (testator or testatrix), although a cross or a thumb print will do if that person cannot write, in the presence of two witnesses. This signature has to be "at the foot or end of the will" for obvious reasons.

Amendments to wills can be made by codicil which must be signed and witnessed in the same way as the original will.

The Content of the Will

The content of the will should be a clear and unambiguous explanation of the deceased's directions for his/her estate. It should distribute the estate according to his/her wishes, as long as there is an estate to distribute, of course.

It is sensible to include a "survivorship clause", which simply states that the spouse will inherit if he/she survives the deceased by, for example, thirty days, otherwise a named individual or individuals will inherit the estate.

It should also be noted that if the two spouses do die together the elder is deemed to have died first if actual time of each death cannot be determined.

If a survivorship clause is not included and part of the estate is left to someone who has died recently this will create "partial intestacy" and this residue will be distributed under the rules of intestacy.

Updating a Will

Since individual circumstances do change regularly it is a wise precaution to ensure that a will is up to date and still reflects the testator's wishes. Any updates or codicils have to be signed and witnessed as before.

Revoking a Will

There are four ways to revoke a will:

• Subsequent will or codicil
• A writing executed like a will
• Subsequent marriage
• Destruction of the will, if intended

It will be noted that a new will should be written on marriage or remarriage, unless it appears from the will that at the time it was made the testator was expecting to be married to a particular person and that he intended that the will should not be revoked by the contemplated marriage. Although divorce will not revoke a will, a former spouse cannot take any gift under the will unless a contrary intention is shown in the will. In addition, any appointment of the former spouse as executor or trustee is revoked on divorce. If a will is destroyed it has to be proven that there was intention to destroy the will for it to be revoked. Accidental destruction is not a revocation.

Family Provision Claims

Individuals can make claims against wills to revoke them, often on the basis of "unsound mind" and there are normally cases going through the courts which would illustrate this. It is up to the courts, in these cases, to uphold or dismiss any claims made.

Dependants who have not been mentioned in the will, or for whom inadequate provision has been made, may be able to claim reasonable provision from the estate under the Inheritance (Provision for Family and Dependants) Act 1975.

It should be noted that a "common law" spouse has no legal claim on a will or an estate unless judged to be a dependant under the above Act. Before 4th April 1987, illegitimate children had no legal claim on a will since the law did not recognize them. After that date, illegitimate children were put on the same footing as legitimate children.

Scots Law

As was shown previously the law in Scotland is somewhat different to the law in the rest of the United Kingdom in relation to wills.

The major differences are as follows:

• a Scottish will is not revoked by subsequent marriage
• a cross or mark is not allowed for a Scottish will and only a Justice of the Peace, solicitor or parish minister can sign on behalf of the testator
• a will may be "holograph" that is a will in the testators own handwriting and signed with no witness required
• Some of the terms used are also different.

Wills - A Summary

A will is an important part of any financial plan for an individual in order to gain control over their estate. It can also be a very useful method for mitigating Inheritance Tax.

Here are some hints for making wills that will aid individuals :

• always store a will where it can be found, preferably in a safe place, e.g. bank, solicitor, etc.
• include survivorship clauses to mitigate the potential Inheritance Tax liability
• remember that wills are annulled on marriage, subsequent will revocation or intended destruction.
• review wills regularly

The will is an important mechanism for gaining control of distribution of the estate after death, but an individual also needs to understand what happens to an estate after death so this will be covered in the Probate Process.

Protection of Income & Capital ® 1995 Thomson Barrett Organisation.
All rights reserved.

Introduction to the Probate Process

It is a strange fact that in the life assurance industry a good deal of time is spent talking about death, but very few people fully understand what happens when an individual dies.

The process is quite a complicated one and can drag on for many months before an estate is successfully administered. This chapter will describe the situation in the U.K., excluding Scotland. The essential differences in the procedure in Scotland will be outlined at the end of the chapter.

Registering the Death

The first formality when someone dies is to register the death with the Local Registrar of Births, Marriages and Deaths. This information can be found in the local telephone directory.

The Certificate of Registration is free and is needed to claim any social security benefits. Certified copies of the death certificate will be needed to start the probate process. These come in various forms and a small charge is made for them. The DSS publishes a very helpful booklet "What to do after a Death" (Booklet D49) which outlines the registration procedure.

What is Probate ?

Probate is the proof of legal authority to sort out the affairs of a deceased individual. If there is a will, the person who seeks probate will be the executor or executors. If there is no will this will be handled by administrators who apply for "letters of administration".

The application has to be made to the Probate Registry, which has approximately 30 offices and a number of sub-offices in England and Wales.

The Executors

If there is a will it will name at least one, but not more than four, executors, whom have to be willing to act as executor of the will. If none are willing to act, the will must be carried out by administrators appointed by the Court.

As an alternative to refusing to act an executor can appoint someone else to fulfil his obligations as attorney (a person appointed to act for another in business or legal matters).

Executors have broadly the same duties as a trustee with regard to the deceased, creditors of the estate and beneficiaries of the estate. This entails claiming only necessary expenses and not using the estate for any form of malpractice.

Executors cannot be "an infant during his minority" or " a person of unsound mind".

The role of the executor is to successfully deal with the estate of the deceased and, as such, the deceased's estate is deemed to be vested in him. Only if the estate is successfully administered can potential beneficiaries benefit from the bequests of the will. Executors normally have twelve months to administer and wind up an estate.

The Probate Process

The Executor's first job is to establish the size of the deceased's estate.

The estate includes all land, buildings, personal chattels, unpaid salary, life assurance policies, investments, etc.

It also includes outstanding debts to the deceased, which have to be collected by the executor. Similarly, debts owed by the deceased have to be repaid and taken out of the estate before any beneficiaries are paid.

If debts owed are more than the estate is worth the estate is deemed insolvent and, if this happens, it is imperative to involve a solicitor.

Paying the Inheritance Tax Bill

Once the size of the estate has been calculated, the first task is to calculate and pay the Inheritance Tax liability. Probate cannot be granted until this is done.

Full use should be made of Inheritance Tax exemptions to mitigate the tax and speed up the process. It may be that the bill is a large one and has to be financed since the executors cannot gain control of the money in the estate until the IHT bill has been paid. This is normally done through the bank of the deceased where an executorship account can be opened for executor transactions. There is tax relief on the interest on a loan for these purposes.

Getting Probate

Once the estate has been valued and arrangements to pay Inheritance Tax have been made, executors can formally apply for grant of probate (or letters of administration if an administrator).

Once the forms have been completed, the executors will need to "swear the forms" at the Probate Registry, where a fee has to be paid. This can be substantial!

The executors (or administrator) can then legally administer the estate.

Dealing with the Estate

The executors need to:

• collect in all cash, e.g. from bank, building societies etc.
• pay all debts
• sell off assets, such as houses, shares, etc. unless these have been specifically bequeathed to particular legatees or devisees
• pay any other tax due

This latter point is interesting since an estate is liable to income tax, like any other tax payer, on income.

There is no tax-free allowance, however, it is all charged at basic rate tax no matter the amount. Remember that the executors can claim relief on loans to pay the Inheritance Tax bill.

The estate is also liable to pay any Capital Gains incurred by the sale of assets not exempt, but normal annual allowance applies.

Winding up the Estate

Once all these steps have been fulfilled, the executor can commence the job of dealing with the bequests and legacies laid down in the will. It is a good idea to ask for a simple signed receipt from beneficiaries to acknowledge receipt of the legacy.

If all the bequests of the will can be met by the value of the estate then the residue should be given to the named person and the estate wound up.