Your will is one of the most important documents you’ll ever write.
In it, you can decide what your legacy will be for your wealth when you’re no longer around. In essence, it’s your last chance to decide who will receive your money and how much they’ll get.
There’s a lot to fit into this vital piece of paperwork, some of which you might not think about until it’s too late.
So, make sure you fit these six important things in when it comes to writing your will.
Who do you want to benefit from your estate?
The first and most obvious place to start with your will is to include details for who you’d like to benefit from your hard-earned wealth.
The individuals who you choose to give your wealth to are known as your “beneficiaries”, and you can select whoever you’d like. Whether that be your spouse, your children, or perhaps even your stepchildren, your beneficiaries are legally entitled to your wealth.
If you’ve been married more than once, this decision can be even more important, as there may be individuals who think they have a claim to your wealth that you’d prefer not to receive any.
By stating your beneficiaries explicitly in your will, you can be sure that the people you want to benefit from your estate will receive your wealth.
Will your wealth or circumstances change during your lifetime?
Once you’ve written your will, you always have the right to make adjustments to it as your life changes.
Reviewing your will regularly is often a good idea. You should check that your will still reflects your wishes every two years, or after every big life event. For example, having a child or getting remarried could change who you want to include in your will.
Another reason to review your will is that your level of wealth might change. If you inherit money or make a substantial gain on your investments, you may wish to change how you distribute your wealth to your beneficiaries. Or, you may now have a tax liability where you didn’t previously.
Make sure you review your will so you know that it’s still fit for purpose throughout your lifetime.
Do you have children you need to consider?
If you have dependent children, either through age or disability, it’s vital you make provisions for them in your will.
You can name a guardian for your children in your will in case you die while they’re still minors, ensuring they’ll be cared for in your absence. You can also create structures, such as trusts, that will make sure they receive some of your wealth at an age of your choosing.
If you have a dependent adult child, you can make similar structures that protect them and their wellbeing for the future, too.
Would your wishes change if the unexpected happened, such as needing care?
You can never know for certain what’s going to happen in life. That’s why it can be good to prepare for the worst in your will.
For example, what would happen if you became unable to live independently and needed care? Your will provides a way for you to create a plan for your wealth that protects you if this is ever the case.
Similarly, you might want to create a Lasting Powers of Attorney (LPA) for someone you trust, so that you know you’ll be looked after if you ever lose the ability to make decisions for yourself.
It’s important to create a will with these elements included as soon as possible, as you never know when you might come to rely on them.
Do you want to make gifts during your lifetime?
You’ll undoubtedly want to make sure your family receive as much of your wealth as possible when you’re no longer around to use it, and making gifts in your will is a popular way for many people to do just that.
Planners often suggest gifting as a strategy as it can help to reduce the value of your estate, potentially mitigating an Inheritance Tax (IHT) bill.
IHT is charged at 40% on any value above the tax-free nil-rate band (NRB) of £325,000 – or £500,000 if your children or grandchildren inherit your home.
By making a charitable donation in your will, you can reduce the size of your estate, limiting IHT. And, if you gift up to 10% of your “net” estate to charity, your IHT rate is reduced to 36%. That means more of your money will go to your family, rather than to HMRC.
Do you need to consider Inheritance Tax?
Even if you’ve considered gifting to reduce the value of your estate, you may still find yourself with a large IHT liability.
If this is the case, your will presents an opportunity to create tax-efficient structures that help to reduce the total value of your estate. This includes gifting, but could also be something like taking out life insurance or putting assets into trust.
Aside from reducing the value of your estate, there are various schemes, structures, and reliefs where you can reduce IHT by investing your money.
IHT can be complicated, so it’s best to speak to a financial planner who can find the right strategies in your personal circumstances.
Need help writing your will?
If you’d like to know what you should include in your will, please contact us at Novus Financial Services.
Email email@example.com or call 01423 870731 to speak to us.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.