Getting around to doing some “life admin” easily falls to the bottom of any to do list when competing with the demands work and family life, but taking some time out to make sure that you are protecting yourself, whatever your relationship status, can reap benefits should things not pan out as expected.
Making a Will is one of those things that many of us put off, often deterred by the cost or the idea of having to think about the inevitable, which can be tough to get your head around. However, dying “intestate” (without a Will) can mean that your wishes in life are not reflected on death and the loved ones that you would like to inherit are left without, which can lead to family conflict and disharmony without you there to pick up the pieces.
It is worth reviewing your Will at the time of key life events, such as:
- marriage (which revokes a Will, meaning it is as though the Will never existed and the Intestacy Rules apply);
- buying a property (especially important if you are unmarried and living with your partner);
- receiving a windfall;
- the birth of a child or grandchild; and
- on separation or divorce (in the case of the latter, the spouse is treated as having died first and the designated assets fall back in to your estate for distribution with anything else you have).
It’s easy to make an “off the shelf” Will but more often than not, there is something in an individual’s circumstances that complicates things or that may not be covered or thought of by a DIY Will.
Even if you are happily married, it’s not correct to think that you don’t need a Will as everything will go to your other half. A certain amount will, but then the remainder can go to other people. It is worth getting advice to better understand this and help to do some sensible estate planning with this in mind.
Connected to making a Will, the way a house is owned can affect what happens to your share of it on death and again this is worth consideration at the time of key life events.
If you and your other half own your property together, as joint tenants your share will automatically pass to the other if you die, but as tenants in common your share passes under your Will or the Intestacy Rules. Understanding (and possibly changing) this is particularly important if you are going through a separation.
Often clients don’t realise that they may have a Capital Gains Tax liability on disposal of their assets. Regardless of whether a certain asset is to be sold or transferred, when separating the theoretical CGT liability needs to be taken into account, so that the true net value of the family pot of money can be understood.
For separating spouses, there are limitations as to when assets can be transferred tax free and so this could mean that financial settlement discussions need to progress at pace, especially if there is a large CGT liability that could have a significant impact on the available pot of assets.
It is also important to have an understanding of the tax implications of any decisions regarding the family home. One spouse may have moved out of the family home, but not taken steps to separate their assets on separation, waiting a few years to formalise things, and could find that they have lost a portion of their Principal Private Residence Relief potentially giving rise to a CGT liability.
Even in what can seem the most straightforward of situations, there can be complications that may not be immediately apparent.
Whether getting together, moving in together, getting married or separating, choosing not to investigate the legal implications, ignoring them, or choosing to DIY in a bid to save costs can have huge consequences.
It is worth investing (finances, emotions and time) in some sensible life, wealth and estate planning:
- Consult your financial advisor to plan future financial and lifestyle goals and ensure that you are on track to afford these and to avoid any nasty surprises in the future.
- Check in with a family solicitor when embarking on major life changes (a new partner, engagement, buying a new property, pregnancy, separation) to make sure that there are no legal implications that may detrimentally impact on your situation and so that you fully understand the potential impact of any decisions that you make. It’s often the last thing that we want to think about, but investing a little time and money at the outset can be far cheaper and straightforward than trying to unpick things further down the line.
I am able to advise in the context of relationship and family events and have colleagues who are experts in property law, Wills and tax and estate planning who I work closely with to provide high quality, cost effective and bespoke advice. If you or a contact are in need of some guidance, please do get in touch.