5 reasons why Will writing in London is important for your family’s future
According to recent data released by HMRC, £7.1 billion was collected in Inheritance Tax for the 2022/2023 financial year. It will come as no surprise that of all the regions in England, London has the highest rate of estates liable to Inheritance Tax. In the 2019/2020 tax year, London and the South-East accounted for almost 50% of all estates in England in which Inheritance Tax was payable.
If you are a London resident, you will no doubt be seeking ways to ensure you are not part of this statistic and to mitigate your Inheritance Tax liability which will in turn, have a positive impact on your family’s future.
Here are five reasons why writing a will is important for your family’s future in London:
To allow for flexibility
London is often regarded as the financial capital of the world. Significantly higher salaries compared to the rest of the UK, often results in more high net-worth estates made up of an array of assets. Inheritance Tax is therefore more likely going to be payable on estates in London, than elsewhere in the UK.
Leaving your assets outright to your chosen beneficiaries may not be the most tax efficient way of dealing with your estate. Tax laws are everchanging and the best solution may be to leave your estate in trust and include flexible trust provisions in your Will. This will allow your trustees to make the most tax efficient decisions at the time of your death. An outright gift of these assets would not allow for that, and your trustees would lose any discretion.
Your trustees would follow a detailed Letter of Wishes prepared by you, which offers them guidance on how you would like your estate to be distributed after your death. You can provide certain beneficiaries with a right to income only, a right to live in a property, or request that a beneficiary only receives income and/or capital at a certain age. There are a wide range of options available to you, provided you include them in a Will.
To claim Inheritance Tax allowances/exemptions
To ensure that an estate benefit from the very few Inheritance Tax allowances and exemptions that HMRC offer, a carefully drafted Will is essential.
It is a common misconception that on the death of your spouse, your entire estate will pass automatically to the surviving spouse, if there is no Will. Gifts to spouses and charities pass completely free of Inheritance Tax. Unless there are specific provisions inserted in a Will, these exemptions could be lost.
Provided they meet the conditions, certain assets (or investments in the assets) may benefit from Business Property Relief (BPR) and Agricultural Property Relief (APR). These two reliefs, when successfully applied, allow assets to pass free of Inheritance Tax (subject to certain conditions). Careful estate planning can ensure that assets benefiting from APR and BPR pass to beneficiaries who are otherwise liable to Inheritance Tax (i.e., beneficiaries other than a spouse or charities).
For asset protection
Protecting assets for future generations is quite often a concern for individuals, particularly where a high net-worth estate is concerned. In the UK, 1 in 3 families are estimated to be ‘blended’, meaning it is more important than ever to ensure children from a first marriage are provided for when a parent remarries.
It is important to note that a marriage revokes a previously valid Will. Having an airtight Will in place after remarriage ensures that children from a first marriage are not accidentally disinherited. There are options available to ensure a new spouse and children from a first marriage are both able to benefit from your estate; it is not an either/or situation.
Furthermore, it may be that you wish to protect your assets from a future divorce or bankruptcy of one of your beneficiaries, or perhaps you are worried they are influential or make unwise financial decisions. Trusts set up in Wills allow for Trustees only to release capital and/or income to beneficiaries when appropriate. Without a Will, your beneficiaries may inherit your estate outright, and your assets could be squandered.
To benefit London
Protecting our future generations could be in the form of ensuring that charities, schools, churches, and organisations, in London specifically, are well cared for.
According to London.gov.uk:
- Three of the top ten museums in the world are based in London.
- London is home to the world’s oldest surviving Music Hall, Wilton’s Music Hall.
- The British Library is situated in London, which holds the Magna Carta.
- Each year there are 22,000 music performances, 197 festivals, and ample fashion shows, comedy shows, and film shoots.
Most notably, ‘84% of Londoners think that the city’s cultural scene is important in ensuring a high quality of life’.
To ensure that the positive impact of London’s culture continues for our future generations, many of these organisations require funding, which can be provided through gifts made in Wills. Without having a valid Will in place, only family, distant relatives, and then the Crown would benefit from your estate.
In addition to this, an extra incentive which may not be well known is that when 10% of your estate is left to charity, a reduced rate of Inheritance Tax (36% as opposed to 40%) is available. Again, this can only be claimed if gifts to charities are expressly included in a Will.
To avoid intestacy
It is more important than ever before to have a Will in place, a document in which only 44% of UK adults admit to having. If you are married and have children but die without a Will, your spouse and children all have an interest in your estate. This is likely to give rise to an Inheritance Tax liability and there may be difficulties in paying the tax if money is tied up in assets.
Your estate may also have to spend unnecessary money on legal fees rectifying the situation following your death, something all beneficiaries would have to agree to. This may prove difficult where family relations have broken down.
If you are not married or have children on your death, the rules of intestacy dictate who is entitled to administer your estate as well as benefit from your estate. You could end up in a situation where distant relatives benefit from your estate, something you very much wish to avoid. This situation can be prevented with a Will in place, even at simple one.
Even if you have a valid Will in place, your estate could still end up partially or fully intestate. It is essential to periodically review your Will to ensure that your wishes are still accurate, and the law is up to date.
The only way to ensure your estate is distributed according to your wishes is by having a valid Will in place. Our Wills, Trusts, and Estates team with solicitors specialising in the preparation of simple Wills to complex Wills, tailored to your needs and can help you with legal advice.* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*