Making a will can be uncomfortable territory for some clients, writes Andrew Megson, but it is a crucial part of the planning process. Here he explores what's stopping them from taking the bull by the horns...
Creating a will can be a difficult task - not least because of the rules and stipulations that individuals must get to grips with to write one, but also because thinking about what happens after one dies is uncomfortable territory. As such, many individuals tend to put the process off until they deem it necessary.
According to a recent poll from YouGov, a staggering 82% of Britons aged between 18 and 50 believe that it is vital to have some form of will in place. However, the majority (59%) do not have one.
The fact that such a large portion of the population are hesitant to create a will is very concerning, given that this can cause a great deal of stress and financial bother to close friends and family.
So, why is this the case?
The first reason some individuals might postpone the will writing process is the common belief that they are too young to write a will. This is likely the case for the 76% of people under the age of 35 who have yet to create a will. In some part, this might be owing to the fact that younger members of the population do not believe they have the wealth or assets to necessitate wring a will. Particularly as fewer young people are likely to own property, or a significant number of assets to consider themselves ‘asset rich'.
A further consideration is that, as Britons, we are a reticent bunch; a recent study revealed that the majority (60%) of UK adults consider themselves to be reserved. This figure might imply that there is almost a national reluctance to discuss uncomfortable topics such as death, and creating a will, with close friends and family.
Although both of these reasons are valid, and it can be tricky to be forthcoming about such a difficult topic, putting off writing a will until later in life can make the job of evaluating assets far more troublesome in the future. Likewise, it can also cause a great deal of anxiety and upset for friends and family, in the event of an untimely death.
Getting to the crux of intestacy laws
If an individual dies without having a will in place, their assets will be subjected to highly inflexible intestacy laws. This means that their assets will be divided amongst their immediate family. However, if an unmarried person with no immediate family dies without a will, their assets are inherited by the crown.
Other more complicated cases might entail those who have specific wishes, or assets that they would like to allocate to friends and family. Under strict intestacy laws, people who are married with children will have £250,000 worth of assets go to their spouse, in addition to the half of any remainder - the other half of the remainder will be shared between their children, even if the individual has different ideas about how they would like their assets to be distributed.
In short, this system will cause particular problems for individuals with unmarried partners, as well as stepchildren, or any close friends that they might have preferred to leave their assets to. Even if non-blood relatives are financially dependent on the deceased, these inflexible laws mean that they will receive nothing.
Intestacy laws can be difficult to contest. Unmarried partners and close friends can claim under the Inheritance (Provision for Family and Dependants) Act - for example, if a non-married partner were to provide sufficient proof that they are financially dependent on the deceased, and therefore entitled to support. That said, there are no guarantees throughout this time-consuming and complex process, during what is already a difficult time. Ultimately, creating a will allow individuals to avoid running into these issues, and offer their friends and family some peace of mind.
Avoiding unexpected IHT
Another issue individuals might run into is an unexpected inheritance tax (IHT) bill. Although a spouse can receive the first £250,000 of their inheritance tax-free without a will, any children of the deceased might be landed with a large inheritance bill. Generally speaking, IHT is unavoidable. However, one of the benefits of creating a will means that individuals can manage their assets in more tax-efficient ways.
For example, someone might decide to allocate a gift in their will, and provided this is allocated seven or more years before their death, will be exempt from IHT. Here, individuals must demonstrate assets as outright gifts in their will, referring to these as a "gift with reservation of benefit". This can apply to a range of assets, from fixed sums of money, to property and shares.
Likewise, other individuals might look to Trusts to create a more tax-effective will, enabling them to support beneficiaries outside of their estate without the burden of IHT.
Evidently, creating a will as early as possible brings benefits to the deceased and their close family and friends. Although, it will take something of a culture change to prompt more individuals to engage with will writing - it will take an industry-wide effort to drive lasting change in consumer behaviour.
A good starting point would be for organisations, such as industry professionals, regulatory bodies, government initiatives, to make the benefits of creating a will more widely known to Britons and offer writing guidance and assistance where possible.
Ensuring that Britons have access to all the necessary information and tools to create a will should certainly help to prompt greater engagement and empower more people to get their affairs in order.
Andrew Megson is the executive chairman of My Pension Expert