Planning for the future is often something we put on the back burner, but is a really important thing to do. A will and estate plan aren’t just for elderly people, they are crucial for anyone wanting to ensure
their assets are distributed as they wish once they are gone. In this guide we will run through the basics you need to know about wills and estates, helping you to protect your legacy.
What Is A Will?
A will is a legal document that outlines how you want your assets distributed after your death. It is legally binding and ensures that your possessions, finances and property go to whoever you wish them to. If you don’t create a will, the law decides how your assets are distributed which may not align with your wishes.
A will is also an opportunity to name guardians for minor children, appoint executors to manage your estate, and also include funeral arrangements. It allows you to have a say in how everything is dealt with after your passing, which can also give your loved ones peace of mind.
Why Do You Need A Will?
When you die, it isn’t always the case that your assets will automatically go to your spouse or children. The rules of intestacy (the laws that govern what happens when you die) vary depending on what country you reside in. In the UK, if you die without a will and have no close relatives then your estate could be passed onto the Crown rather than any extended family you may have.
No matter what the size of your estate is, you should still have a will as it prevents arguments among family members. This helps to reduce any added stress during what will already be a difficult time for them. A will can also help to reduce the inheritance tax your estate may be liable for, reducing the amount of estate that goes to the tax man.
What Is An Estate?
An estate is essentially everything you own at the time of your death and doesn’t just include property as the name suggests. It also includes money, investments and personal possessions that you have. Managing an estate isn’t just about distributing everything that is left, it involves paying off any debts and taxes too.
An estate plan often includes a will, but can also involve other documents like trusts, powers of attorney and more.
Key Components Of A Will
Creating a will involves a few key components:
1. Executor: this is the person you appoint to manage your estate, they are responsible for ensuring your will is executed exactly as you wish. It is important to choose someone who is trustworthy as this role comes with a high level of responsibility.
2. Beneficiaries: these are the people who will receive your assets once you are gone. This doesn’t just have to be family members, a beneficiary could also be a charity.
3. Guardianship: if you have children under the age of 18 then you should specify who is going to be responsible for them when you pass.
4. Bequests: these are specific sums of money or gifts you wish to leave to particular people e.g. family heirlooms and personal items.
5. Residuary Estate: this is what is left after your gifts and bequests have been distributed. You should outline how you would like the remainder of your estate to be distributed.
6. Witnesses: a will must be signed in the presence of two witnesses who aren’t beneficiaries - this can be a solicitor and one other person.
Common Mistakes To Avoid
When creating a wills and estates plan it is important to avoid these common mistakes that could cause issues further down the line:
· Not keeping your will updated - life changes regularly, so make sure your will is kept up to date with any new assets or beneficiaries. This is really important after big life events such as marriage.
· Not naming a backup executor - if your main executor is unable to fulfil their duties, having a backup ensures your estate is still distributed as you wish.
· Overlooking digital assets - don’t forget to include things like your login details for online banking and any other important digital files you may have.
· DIY wills - although you can create your own will, it will not be legally binding so ensure you use a solicitor to help you with your will.
A will and estate plan are really important to ensure your loved ones are looked after once you are gone. It can also help to avoid difficult disputes at a time when emotions will already be very high. It is never too early to start planning your wills and estates, so don’t keep putting it off.