Penny Lovell, head of private client services at Close Brothers Asset Management, highlights some home truths that need to be shared with clients.
Death and the financial fallout is never an easy subject to broach. Nevertheless, safeguarding the transition of estates and assets could save a lot of money and heartache in the long run.
A lack of planning in this area is evident even among the affluent UK population. Recent research we conducted revealed that 46% of adults with a household income of £70,000 or more do not have a will in place.
Moreover, among those who do have a will, one in ten have not informed anyone else where it is, according to Foresters Friendly Society and ICM.
Time to get clients talking about wills
Without a will, your client’s assets are at the mercy of the intestacy rules. Their estate will be divided among their relatives in accordance with government regulation and, indeed, could end up with the Crown.
If they do not have children, £450,000 of the estate is awarded to their spouse. The remainder of the estate is then halved between their parents and spouse. Should the parents be deceased, it is divided between the siblings and spouse.
If the client has children, the spouse will only receive the first £250,000 of the estate. After that, the husband or wife has a right to an income – but not the capital – from the remaining estate.
Even worse, if a client is not married to their partner, the partner could end up with nothing since they legally count only as a friend, not a next of kin.
Writing a will can help to combat the threat of inheritance tax, as well as ensuring that assets end up in the right hands.
For example, if your client has assets you anticipate will grow at a faster rate than the increase in the non-taxable allowance, a discretionary will trust can help to mitigate the resulting tax burden. It is worth noting the allowance has been frozen at £325,000 until 2014/2015.
Of even greater concern should be the welfare of any dependent children under the age of 18. Who will have custody of them once the parents are deceased and how will their inheritance be secured?
The courts may decide who is appointed as their guardians.
Understandably, this is often the most pressing provision of a will.
To ensure a will is valid, it must have the signatures of two independent witnesses. Evidently, they cannot be beneficiaries of the will or be married to someone mentioned in it. They must also be over the age of 18.
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