Your will is an extremely important part of your money management, as it allows you to determine where your assets will go after your death.
No matter your age or your current situation, if you are able to make a will, it's an easy way to gain some control over your finances.
You can go about making a will in a couple different ways. A simple google search will show countless 'DIY templates' for under £50, and if your estate planning isn't very complicated, this could be a quick and easy way for you to go.
If your estate is more complex, however, it's more important that you get legal or financial advice. This could be having a solicitor write it from your instructions, or simply review what you create on your own.
How much will it cost?
On average, creating your will can cost anywhere from £100-£750, but this figure is largely determined by how much you need to organise during the process.
What key terms do you need to know?
- Beneficiaries: anyone that is listed in your will as receiving something after you die is known as a 'beneficiary'
- Executor: the person you choose as your executor will carry out your will and wishes after your death. If you use a solicitor to write your will, they can also be your executor (though they don't have to be!)
- Codicil: this is an official alteration to your will - for example, if you change your mind about what you want to give a family member, you must legally update your will.
- Intestacy: this is what happens when you die without a will, or when you leave out certain assets in your will (which would be known as your 'intestate estate')
- Mirror will: if you are in a long-term relationship, you can make 'mirror wills', which allow shared assets to be split identically between you and your partner
- Inheritance Tax: after you die, your estate will be taxed before being given to your beneficiaries. The amount it is taxed by is determined by set conditions, which we'll talk about later in this article...
What do you need to include in your will?
What do you own?
Make a list of the assets you currently own. Property (or other land), cars, or personal belongings are all assets, as well as money in your bank accounts, and any investments or stocks you hold.
What do you owe?
Unless you have no assets to your name when you die, your debts will be taken out of your estate before it is given to your beneficiaries. That's why it's important to stay in control of your finances, and make sure you're not leaving your loved ones any unnecessary debt.
When making a will, you'll truly appreciated an organised budget. This way, you'll be able to easily see what's coming in and going out of your accounts each month, and maybe you'll be reminded of easily forgotten assets in the process!
There are a lot of considerations to make when writing a will. For example:
- If you are the legal guardian for children under the age of 18, who will care for them?
- What will happen if the people you've listed as beneficiaries die before you?
- Do you want to include a charity in your will?
What about Inheritance Tax?
Inheritance tax is complicated, and there's ongoing discussions about whether it's a fair charge on assets that people have already paid tax on throughout their lives. But no matter your views, you need to make sure you understand how your estate could be charged, and how this might influence how you decide to split it up.
Currently, inheritance tax applies to all estates that are worth more than £325,000, though there are specific conditions or circumstances which increase the amount of your estate that won't be taxed.
You should also consider what's known as the 'main residence band'. Since 2015, you are granted an additional £175,000 to your tax-free estate sum if you leave your property to your children or grandchildren. This effectively means that you won't have to pay any inheritance tax on the first £500,000 of your estate, rather than just the first £325,000.
Keep in mind: this only applies if the property you leave is valued under £2 million. Read more about how the conditions change for £2+ million properties here.
What do you do after writing your will?
If your will is written, you've done the hardest part. Now, to make it a legal document, you need to sign it in the presence of two witnesses over the age of 18. These witnesses will also need to sign the will in your presence.
After you've signed, put your will somewhere safe. Make sure you tell your executor where you've put it - you don't want your wishes to be ignored because no one thought to look under the floorboard in the attic!
Once your will is legally complete, you should make sure that you're reviewing it carefully at least every 5 years, or sooner if any big life changes occur. For example, if you get married or divorced, if you move house, or if the executor or any beneficiaries you've named die.
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