Having a will in place is important at any age. But as you get older, or downsize, it makes sense to also simplify your estate. Here are eight steps you can take to make things easier for your family and friends.
1. Make sure you have a valid will
Having a valid will ensures your estate passes to those you want to benefit. It also simplifies and speeds up the administration of the estate, and it may help to save tax.
If you already have a will but you made it some years ago, you should check it. Your circumstances, or those of the people named in the will, may have changed – or the law might have. Nearly half of the wills in the UK are out of date, according to Censuswide (2022).
Review your will regularly. Especially after big life events such as births, deaths, marriages, and divorces.
2. Think carefully about who you appoint as executor
Executors are the people you chose in your will to sort out your estate after you die. They must be people who can handle the responsibility and who you trust to carry out your wishes.
It’s natural to want to appoint those closest to you as executors, but they could be grieving after your death. Think about appointing someone to act alongside them if it’ll be too much for them on their own. A professional, such as a solicitor, may be a good candidate.
3. Don’t forget about lasting powers of attorney
A will covers what happens after you die. Yet there’s a risk that before you die you may lose your capacity to make decisions for yourself. Lasting powers of attorney (LPAs) set out who can make decisions on your behalf when you can’t.
Not having LPAs could cause big problems if you do lose capacity. Your family and friends could disagree about who should manage your affairs. Even if they do agree, the people who want to (who may not be the people you would have chosen) must apply to the Court of Protection first. This costs much more money and takes a lot more time than taking the precaution of making LPAs.
Don’t leave it too late! You need to make your LPAs before your capacity is impaired. Your family and friends can’t make them for you when there is already a problem.
4. Consider leaving a letter of wishes
You can leave letters of wishes with your wills and lasting powers of attorney to give guidance to the people appointed to act for you. These documents aren’t legally binding, so they can be written in informal language and updated as often as you like.
Letters of wishes have a wide range of uses but can be particularly helpful for setting out what you would like to happen to assets of sentimental, rather than monetary, value.
5. Check what assets and liabilities you have
When you die, your executors usually need to give an account of your estate to HMRC. This is so HMRC can assess whether any tax is due.
Knowing what assets you have – and what they’re worth – will help you to understand whether your estate will pay tax on your death. It will also help you identify what steps you might be able to take in your lifetime to save tax.
Consider leaving a list of your assets and liabilities for your executors. Having this to hand (along with the account numbers) could save them valuable time. If the executors take too long to file their account, they may have to pay penalties and interest to HMRC.
6. Check how you own your joint assets
Joint assets can be owned as “tenants in common” or “joint tenants”. Tenants in common own separate shares in an asset, while joint tenants jointly own the whole asset.
The difference is that on your death any assets you own as joint tenants pass automatically to the surviving joint owner, without reference to your will.
If you are married or in a civil partnership and want your spouse/civil partner to receive your assets if you die first, ensuring your shared assets are owned as joint tenants will make that much simpler. This is also important for cohabiting but unmarried parents.
7. Consolidate your assets
The fewer accounts and investments you have, the easier things will be for your executors.
If you have an old bank account with pennies in, for example, your executors will still have to notify the bank of the death and formally close the account. Often the cost of doing so can be greater than the value of the account!
You may find you have some assets you no longer need. Giving them away in your lifetime could reduce your estate for inheritance tax purposes, but seek advice – any gifts made fewer than seven years before death may need to be declared.
8. Get rid of any troublesome assets
Some assets can give your executors more trouble than they’re worth.
To deal with any shareholdings, large or small, your executors must obtain a grant of probate. For simple estates, this is sometimes the only reason a grant is needed at all. Consider cashing in low-value shareholdings in your lifetime to avoid this.
Foreign assets, too, can cause problems. To close even one bank account in another country, your executors may need instruct separate lawyers abroad. This can greatly increase fees and the length of the administration. If your foreign assets are modest, they may not be worth hanging on to.
For more information on estate planning and how we can help please contact our dedicated private client team. Solicitors for the Elderly’s Update your Will week runs 23 – 29th January 2023.