If you have a will in place, an article in MoneyAge could provide food for thought. It reveals that out of the 49% of Britons that have one, 43% have not revisited or updated it since it was written.
While it’s understandable to think that once you’ve written a will, you can relax and forget it, safe in the knowledge that your loved ones will be looked after, the reality could be very different. As financial planners, we always recommend that you review your will regularly to check that it still represents your wishes.
Not doing so may result in your wealth going to someone you may not now want it to go to or your estate being dealt with by someone you no longer deem suitable. With this in mind, read on to learn three important reasons why you should review and update your will if you haven’t done so already.
1. Your beneficiary’s financial situation has changed
If you created your will many years ago, the financial position of your beneficiary may have changed significantly. As a result, they may not feel the benefits of your financial help any longer, and you may feel that it’s more appropriate to leave it to someone else who might.
Alternatively, you may be considering leaving it to a good cause instead. If you have not changed your will to reflect this, the original beneficiary will still receive your wealth, regardless of who you may now want it to go to.
If you do still want your assets and money to go to someone who is now financially secure, such as your child, you may want to consider the potential Inheritance Tax (IHT) implications. As a result of your gift, they may become liable to an IHT charge or face increased exposure to it.
In this situation, you might want to consider leaving your wealth to their children – your grandchildren. To demonstrate why, you may want to consider the following.
If you leave £300,000 to your children and their estate is already liable to IHT, this money is likely to become subject to a 40% tax charge if it’s later passed on to your grandchildren. This means the amount they receive is reduced by £120,000.
By gifting your wealth to your grandchildren directly, the money will not face the IHT due from your children’s estate. Furthermore, you’re passing the money to your grandchildren at a time in life when they may appreciate it more, as it could help fund their first home or university.
Please remember that if your estate is also subject to IHT, this is likely to reduce the amount you pass to your grandchildren. That said, the money will not be liable to a second IHT charge on your children’s estate.
There are several highly effective ways to reduce your exposure to IHT that the government allows you to use, such as gifting money. This is something a financial planner can help you understand, which may help you leave more money to beneficiaries.
2. A beneficiary or executor has died
If someone you had named as a beneficiary has died, you may need to update your will so that the money is left to someone else. Alternatively, you may want to redistribute their portion of your estate among the remaining beneficiaries.
Another reason to update your will is if the individual you’ve named as your executor has died, as you will need to specify an alternative executor. Furthermore, if you no longer want someone to act as your executor, you should change your will as soon as you can.
3. You have been through a divorce
If you have divorced, you should always consider amending your will, as not doing so could have serious implications for a new partner or a new family. Getting divorced does not revoke a will, although it does mean that your ex-spouse will be treated as if they have died for inheritance purposes.
As a result of this, if you have not updated your will, your estate becomes subject to the rules of intestacy. This means your estate may not be distributed as you would want it to be, so for example, your wealth may not go to your new partner or dependents.
Because of this, they might not have the financial security you would want for them. Furthermore, if you have had another child or a grandchild since making your will, you probably want to consider updating it so that they’re included in it.
New arrivals may not automatically be entitled to your wealth if they’re not included in your will.
Get in touch
While financial planners are not legal experts, they typically have a very good working knowledge of wills, as intergenerational wealth planning is often central to their work. As such, if you would like to discuss whether you may need to consider updating your will and the financial effects for your beneficiaries of doing so (or not doing so), we would be happy to help.
Additionally, if you would like to chat about ways to potentially reduce your IHT liability or how to set up a strategy for transferring your wealth as tax-efficiently as possible, we would be pleased to help. Please email admin@stonegatewealth.co.uk or call 01785 876222.
Please note
This blog is for general information only and does not constitute advice. It should not be seen as a substitute for financial advice, as everyone’s situation will be different. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
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