A Will is a legal document that states how you want your assets to be distributed after you die. It has no effect until you die and you can change it whenever you want.
The vast majority of people postpone writing a Will. This could be due in pert to not wanting such a tangible reminder of our mortality. Whatever reason for putting it off, a Will may be the most important document that you ever write, because it allows you to select the people who will receive what you own when you die. If you don’t have one in place, you cannot select the recipients of your estate and the government will decide how your estate is divided.
What is probate?
Probate is the word normally used to describe the legal and financial processes involved in dealing with the property, money and possessions of a person who has died. Before the next of kin or Executor named in the Will can claim, transfer, sell or distribute any of the deceased’s assets they may have to apply for Probate. When Probate has been granted the next of kin or Executor can start to deal with the deceased person’s assets in accordance with their Will. If the deceased died without a Will the law will determine who should receive everything. The Probate process often involves a lot of complicated legal, tax and financial work which can be broken down into five different steps:
1. Identifying all of the deceased’s assets and all of their liabilities in order to determine the value of their Estate. Then verifying entitlement to the Estate under the terms of the Will, or in accordance with Intestacy laws if they did not have a will.
2. Paying Inheritance Tax to HMRC where applicable, and submitting the correct Inheritance Tax return which is required whether or not there is tax due. A ‘grant of representation’ must then be applied for from the probate registry which is a document confirming legal authority to administer the estate.
3. Liquidating the deceased’s assets, settling their liabilities, paying the final Estate administration expenses and accounting to HMRC for any further Inheritance Tax, any Income Tax or Capital Gains Tax due to or from the Estate.
4. Preparing Estate accounts documenting all payments into and out of the Estate, and showing the balance left for distribution to the beneficiaries.
5. Providing there are no challenges to the Estate or other complicating factors preventing distribution at this stage, the estate can be distributed amongst the beneficiaries.
A Will’s importance is clear regardless of your personal situation. Without a Will, you have no input about the distribution of your property after your death or the persons involved in administering the estate. A court makes those decisions, and it has no authority to deviate from the law. In essence, the state steps into your shoes and makes all of the decisions for you.
This can be easily avoided with proper planning. By creating your Will now, you can always add to the provisions or alter the document as your life evolves. It’s important to review your current Will every five years to ensure that it’s up to date and still reflective of your future wishes.