We are often asked by clients why a Will is of such great importance and it is a topic that has been muddied greatly over time.
The importance of a Will can be highlighted by three topic areas: Tax, Time and Direction.
Tax
Tax is arguably the primary factor and one which we all want to mitigate as much as possible.
Let us take the example of a couple who are married (or in a civil partnership as this applies here also) who have a child of their own.
In the absence of Wills, it may very well be the case that the couples will not benefit from full spousal exemption in relation to their estate. Spousal exemption is an exemption applicable on first death whereby whatever passes to the surviving spouse or civil partner is free from inheritance tax. Furthermore, on that first death they may very well use much of their Nil Rate Band which could mean that upon the second death inheritance tax becomes applicable.
Furthermore, it could be the case that the estate on second death does not benefit from an additional Residential Nil Rate Band which can be used whereby a property forming part of the estate is not used fully to mitigate for inheritance tax purposes.
Time
Another critical factor when dealing with an estate is time.
When a Will has been properly entered into, it allows those persons who are appointed as Executors to commence with dealing with the estate. This is particularly relevant where there is a property. In the absence of a Will, those who are the personal representatives cannot market the property as they do not have the power to do so under law. The Executors appointed under a Will, on the other hand, can instruct estate agents accordingly.
Direction
Direction allows for control; control in so far as to where you wish for your estate to pass.
In the absence of a Will, an estate will be governed by the intestacy laws (that is, the rules which the government has posed). Therefore, it may very well be the case that relatives who you did not want to be considered will end up receiving a share of the monies.
For more information on how this may affect you and for any advice regarding Private Client matters, please contract Shamit Rooproy on 01344 775 311.