Will Writing
Will Writing
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Basic Wills
This covers the essentials of a valid will if you are not likely to have any inheritance tax liability now or in the near future and if you do not require any complex trust provisions in your will. It will include appointment of executors, guardianship provisions and simple trusts for dependent beneficiaries.
Nil Rate Band (NRB) wills
The Nil Rate Band is the amount that you can currently leave to any beneficiary free of inheritance tax (currently £325,000). These wills are a good way of protecting the Nil Rate Band amount for your children from any future re-marriage, but also of protecting your Nil Rate Band from being lost on the death of a surviving partner who is not a spouse.
Flexible Life Interest Trust wills
This will would be drafted so that a trust is created on your death to pay the income to your surviving spouse (and there would be no inheritance tax payable on this as it would act in the same way as if the estate were passed to the survivor outright), and following the death of the survivor, the trust fund is held for your children or other nominated beneficiaries. There are also powers within the trust for the trustees to pay capital to the surviving spouse if required, either outright, or by way of a loan to be repaid on death. However, the benefit of the trust is that it protects assets for your children from any future remarriage, and the assets are not classed as belonging to the survivor for the purposes of any “means” test should the survivor at some stage need to be taken into care. These trusts are called “Flexible Life Interest Trusts” as they allow the surviving spouse to make gifts out of them to children, and, as long as they then survive the requisite seven year period for making a lifetime gift, then those assets can pass free of inheritance tax. Otherwise the trust will be taxed to inheritance tax on the second death in the same way as if the assets had passed to the surviving spouse outright on death.
Property Trusts
There is a concern about getting ill and having to go into “care” later in life, and it is possible to protect the share in the property of a deceased spouse, which, under normal circumstances would pass to the survivor automatically on death. A couple normally own a house as “joint tenants”, and if this is the case, on the death of the first, the survivor inherits the share of the deceased automatically and not in accordance with any will. It is possible to reclassify the tenancy, and for a couple to hold a property as tenants in common, each owning a 50 per cent. share of the property. This may sound the same, but each share is distinct from the other and this means that you can “will” your share to a trust fund, the eventual beneficiaries of which will be your children. This means that if the survivor is ever assessed for care home fees, they can only be assessed on their 50 per cent. share as there will be a co-owner, namely the trustees of the Property Trust. The trustees could then rent out the property with the assistance of a power of attorney, and raise some of the money towards the care home fees, which might in the long run prevent the need for the sale of the property to pay for the fees.
Discretionary trust wills
These wills give you the greatest possible freedom to deal with trust assets and income and are useful if there are a number of beneficiaries and you don’t have a clear idea of who will need what share at the relevant time. They are also useful if you do not want to give your beneficiaries any right to income or capital, for example, if you are worried that they will not manage the money wisely, lose it to a divorce or lose state benefits as a result of the entitlement. You must be happy to relinquish control to your trustees if making such a will. You can give your trustees some guidance by way of a letter of wishes which will be left with your will, but this will not be binding on the trustees.