It is likely that if you have made a Will, it would have been prepared before the start of the financial downturn that we all now face. The current economic climate means that the value of your assets and the extent of your wealth may be diminishing significantly and this will impact on the amount that is left under your Will.
Typically a Will ensures that provision is made for your immediate family, usually any surviving spouse or civil partner, and your children or grandchildren. You may however also want to recognise others such as godchildren, charities you support or perhaps a long standing friend or neighbour. Usually you would not want these people to receive a significant proportion of your assets so you choose to leave them a specified amount.
Specific monetary legacies to named recipients are therefore often included in Wills for this purpose. The amounts can be relatively small or in certain circumstances be much more significant. The usual intention however is that the rest of your assets after these legacies have been paid, known as the residue, will be the majority of your assets and these will pass to those named as the “residuary beneficiaries”, usually the immediate family.
Bequests do however take priority when your assets are distributed, so with falling values of personal assets, what may have seemed a small legacy in comparison to the whole estate may now be a significant part. This may mean that your friend is going to receive a much greater part of your assets than you anticipated and in the worst case situation, your friend may receive the majority of your assets, leaving little or nothing for the “residuary beneficiaries”, these being the people who were meant to be the main recipients of your assets.
There may also be practical difficulties in paying legacies where originally it was envisaged investments would fund the bequests but these have significantly reduced leaving more restricted assets such as the family home as the only valuable asset in an estate. This could mean that such assets will need to be sold in order to pay the legacies.
It is therefore extremely important to review your Will to consider whether any legacies are still appropriate or whether they should be reduced or removed. In addition, since your Will was prepared there may also have been changes in your personal circumstances or in legislation which means that other changes to your Will should be made.
If you do not have a Will, the issue of legacies taking priority is obviously not relevant but instead your assets will pass in accordance with the intestacy rules. Under these rules an unmarried partner will receive nothing at all and a spouse or civil partner will not necessarily receive everything. Consequently, those you wish to benefit may not be left with appropriate provision. Therefore, if you wish to be able to choose who will receive your assets on your death you must make a Will. As well as providing certainty for those you leave behind, if drafted correctly, a Will can provide significant Inheritance Tax savings.
Whilst it was important to undertake planning when times were good it is even more important to plan well when times are tough so as to make the most of what we have and to ensure we benefit those we wish to on our death.
When making or reviewing a Will it is vital that you seek specialist advice. We at Hay & Kilner can guide you through the process as well as providing wider estate planning advice to help you preserve your assets for the benefit of you and your family.
Please note: This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.