Wills & estate planning

If an individual was to divorce after the time a Will had been written, any beneficial entitlement left to an ex-spouse or civil partner would be removed. It is therefore recommended to re-write or amend a Will after any divorce or separation. This may be of particular relevance where a Will leaves an entire estate to a divorced spouse. In this case, intestacy rules would apply.

A qualified solicitor should be able to produce a valid Will.

You may consider writing a Will yourself; however you should only do this if you are certain of its validity. It is important to be aware that if a challenge to a Will’s validity was to be made, this would generally be once the person who has written the Will has died.

If an individual dies without a valid Will in place, intestacy rules will apply

These are the rules that determine how an estate is divided between beneficiaries. You should note that Intestacy rules are applied differently; depending upon which country within the UK you are domiciled.

It is important to note that intestacy rules may not distribute your estate in a way that is the most tax efficient for you. You may find you are able to reduce a potential inheritance tax charge by making gifts before death, or planning carefully who will receive your estate upon your death.

You may also find that Intestacy rules do not divide your estate in the way that you may have wished.

Inheritance Tax (IHT) is a tax on the value of an individual’s estate at the point they die. There would normally be no Inheritance Tax to pay when an individual dies if:

• The value of the individual’s estate is below the nil rate band of £325,000
• The entire estate is left to the individual’s spouse or civil partner
• Any unused portion of the nil rate bands can be transferred to your surviving spouse or civil partner.

If your estate exceeds your available nil rate band at the point you die, inheritance tax is payable. This is normally charged at a rate of 40% on any element of your estate that exceeds your available nil rate band. In some cases inheritance tax is charged at a lower rate. This may apply if you gifted some of your estate away before your death, or if you have made gifts to charity in your Will.

From 6 April 2017, a Residence Nil Rate Band has been phased in. This is available in addition to the current nil rate band of £325,000.

• The allowance for main residence can only be used to gift a home to direct descendants (e.g. children and grandchildren)
• In addition to the current nil rate band, the Residence Nil Rate band can be transferred to your surviving spouse / civil partner

The Main Residence Nil Rate Band will be £175,000 from 6 April 2020. For anyone who dies before this date, a lower Main Residence Nil Rate Band will apply.

A power of attorney can be set up to enable someone to look after your welfare and / or financial affairs. The person setting up the power of attorney is referred to as the donor, and can choose who they would like to look after their own financial affairs. The donor can also choose whether to grant this power immediately, or only in the event that they lose mental capacity in the future.

A power of attorney can also be set up to choose a person who will be responsible for making health and welfare decisions on the donor’s behalf. This power can only become effective from the date the donor loses mental capacity.

It is important to be aware that a power of attorney cannot be set up by someone who has already lost mental capacity.

The process for setting up a power of attorney is different dependent on which country in the UK you live.

If a power of attorney has not been set up before someone loses mental capacity, the courts can assign someone to look after a person’s financial affairs.

Setting up a power of attorney before this time is likely to be easier and will avoid the potential delays that could be involved in making applications to the relevant courts.

Setting up a power of attorney will also allow an individual to choose a person or number of people they would like to look after them. Further to this, they can choose to grant specific powers and make decisions about their health care treatment before they lose mental capacity.

If you would like to set up a power of attorney but are unsure about which type would be most suitable for your needs, you should seek legal advice.