- WILLS

• Clear and unambiguous instructions
  The most important reason to create a Will is that it provides your loved ones with clear and definitive instructions on how you would like your last wishes to be undertaken. This is important as it avoids any unnecessary disagreements occurring at an already difficult time.
• Appointing the people you trust to administer your estate
  A Will enables you to appoint only those people you consider the most capable and trusted to administer your estate as your executor and/or trustee. This does not have to be a relative; it can be your closest friend or a professional, whichever you feel is more capable and/or appropriate.
• Legacies
  A Will is an appropriate way of remembering a person or organisation close to you through leaving a legacy. If you do not make a Will, it is unlikely this person or organisation will be remembered as your estate will be distributed according to the rules which apply when someone dies without leaving a Will.
• Tax efficiency
  Inheritance tax (IHT) is a great concern for many people. Creating a Will is an effective method to ease these concerns and gain vital advice on how to reduce your liability regarding IHT.
• Protection for unmarried cohabitants
  If you do not already have a Will and you are not married your partner may not inherit from your estate and therefore could end up homeless and in financial trouble. Making a Will is an effective way to ensure they are successfully provided for.
• Life interests
  Life interests can be included in your Will to ensure family members such as young children or elderly parents are provided for and remain in a home, instead of it being sold.
• Marriage, divorces and re-marriage
  Wills are automatically revoked if you marry or re-marry and are altered if you divorce, unless specifically addressed in your Will.  It is essential to create or update your Will so your loved ones are provided for.
• Funeral arrangements
  A will is the best way of informing your loved ones of your funeral wishes. This can include any personal preference, be it cremation, burial or even having your body used for medical education purposes.

If you die without a valid Will, the intestacy rules will apply:

If you are married but with no issue, your surviving spouse will take absolutely all personal chattels and the first £200,000 of your estate plus a half share of the residue. The other half share of the residue will pass to your parents or, if neither is alive, to your brothers or sisters or their issue.

If you are married and have issue, your surviving spouse takes absolutely all personal chattels and the first £125,000. Your surviving spouse will then have a life interest in half the remainder. The rest of the estate (ie half the remainder immediately and half the remainder on your spouse’s death) goes to your issue on ‘statutory trusts’.

If you have no surviving spouse but issue, the estate is held for your issue on ‘statutory trusts’.

If you have no surviving spouse or issue, your estate will pass to your parents, If neither parent is alive your nearest relatives will inherit in order of priority:

1. Brothers and sisters and the issue of any who have predeceased
2. Half brothers and half sisters and the issue of any who have predeceased
3. Grandparents
4. Aunts and uncles and the issue of any who have predeceased
5. Half brothers and half sisters of your patents and the issue of any deceased half uncle or half aunt

If there is no living beneficiary the Estate will pass to the Crown, the Duchy of Lancaster or the Duchy of Cornwall.

‘Common law wives’ obtain no benefit under the intestacy rules although anyone financially dependent on your can make a claim for financial provision out of the Estate under the Inheritance (Provision of Family and Dependents) Act 1975.

Karen Starkey and Jack Haskew of our Wills, Lastings Powers of Attorney and Probate team, field some key questions about life interest trusts and how they work.

Q: What exactly is a life interest trust?

Karen Starkey: A life interest trust is an arrangement whereby your Will provides for one beneficiary during their lifetime but, once that person dies, your assets are transferred to someone of your choosing rather than in accordance with your lifetime beneficiary’s wishes. A life interest trust can be created in respect of your entire estate, or in relation to only one (or several) specific assets. For example, if you have children from an earlier relationship and a property you purchased before meeting your current partner, you might be keen to ensure your children ultimately benefit from your home while being happy for your partner to receive the rest of your estate.

Q: Who typically might want to look at a life interest trust?

Jack Haskew: Life interest trust Wills are particularly popular with couples who have children from previous relationships, such as those in second (or third) marriages. They can also be useful to couples who have married later in life, having already established independent lifestyles, and those with dependent siblings or elderly parents. The reasoning always comes down to protecting assets for loved ones.

Q: Can you set a timeframe for a life interest trust?

KS: As the name suggests, a life interest trust typically remains in place for the remaining life of your initial beneficiary. You can, however, create one for a set period, such as five years, or until a certain event occurs. If your children and your partner are a similar age, you might not want your children to have to wait a long time before receiving their inheritance, or risk them predeceasing your partner and missing out altogether. In such a case, a set period could be sufficient to ensure your partner does not feel rushed out of their home without your children’s inheritance become tied up for too long.

Q: What are the main benefits of a life interest trust?

JH: Life interest trusts afford you greater control over the distribution of your estate. If you want to ensure your partner has access to your assets during their lifetime, you could simply leave your estate to them absolutely. However, in doing so, you also give away total control of those assets. When your partner dies, they could leave their estate, including whatever assets they inherited from you, to someone else entirely.

KS: Life interest trusts are also a useful tool in protecting your assets from the bankruptcy or divorce of beneficiaries. If you leave assets directly to someone who later becomes bankrupt, or who later divorces, those assets would be deemed their own for the purpose of bankruptcy or divorce proceedings. For example, if one of your children is going through a divorce, any assets held for their benefit in a life interest trust cannot be considered as part of the proceedings and will, therefore, be safe from that child’s former spouse.

Some life interest trusts are created not to save assets for children, or other loved ones, but to protect vulnerable beneficiaries. You might want to leave your estate to a sibling who is unable to manage their own finances independently, or who is in receipt of means tested benefits. Placing your estate in a life interest trust, with that person as the lifetime beneficiary, allows the trustees to provide for their needs, without that person having to manage the money or risk losing their benefits.

Q: And what are the disadvantages?

JH: Any trust arrangement requires a greater level of administration. Trusts can also attract complex tax rules. A life interest trust over an entire estate which receives a regular income and potential capital gains, as well as requiring frequent capital payments to be made for the lifetime beneficiary, are usually more costly to manage than a life interest trust over a family home in which the lifetime beneficiary lives. However, it is important your trustees ensure they are complying with all the legal and tax requirements of your trust arrangement. With this in mind, it is equally important you appoint suitable trustees. Before making a Will with a life interest trust, you should always seek professional advice. Similarly, if you are the trustee of a life interest trust, you should seek advice to ensure you are always acting within your remit.