Wills Myth Busting

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Wills Myth Busting, Yellow Brick Mortgages

Wills Myth Busting

On this episode of the Financial Planning podcast, we’re busting some common myths surrounding wills with Jonathan Mott.

Wills are for old people to worry about.

Yes, that’s a common myth. I think it’s more of a pressing concern for someone who is older or in ill health because they can see the urgency of getting their affairs in order. But I wouldn’t suggest that it’s just for those people to worry about. Anyone who’s over the age of 18 and has mental capacity would have some requirement for a will.

I’ll give you an example. Anyone who has children under the age of 18 needs to think about who would look after their children if they were to pass away. A will can incorporate that. You can appoint legal guardians to your children, meaning that they wouldn’t be scooped up into the care of social services were you both to pass away. 

Obviously you’ve also got the financial side of things. If you own a house or you’ve got savings, investments, etc then you may want to consider making a will so that you can divide that up to the people that you want to receive it. It’s obviously not just for people who are old or infirm – everyone requires a will.

Wills are just for the rich. I don’t have anything to give.

As I said, the most overlooked part is the guardianship of children. Most people can relate to that point, which is why I brought that up first. But even if people think that they don’t have a big estate it’s important. 

You might not have millions of pounds, but young people try the hardest to save up for a deposit to buy their first house. They buy a home and have a mortgage – which may seem like it’s going to take a lifetime to pay off, but they’re on that first rung of the housing ladder. They have an asset. They’ve gone through the hard bit and made sacrifices to get there.

Putting in place a will would be very sensible. If there’s two people buying a house together, and one of them dies, you want to protect the surviving person from being made homeless. Equally, if you’re a sole buyer, you might want to leave the property to your brother or sister or parents. Putting in place a will dictates who’s going to get your equity within that asset. 

I can see why people often think that wills are for the rich. The rich have a bigger estate but that’s not to devalue your own situation. You still have an estate, legally speaking, and you should put measures in place to deal with that if the worst happens.

My family will sort it all out when I’m gone.

That’s quite a burden to put on your family. And it doesn’t work like that. If you die without a will in place, the legal term is that you die ‘intestate’ – which means that your family does not decide who gets what. This may surprise you, but the government decides that. 

It’s provided for under the ‘rules of intestacy’ which simply put is a hierarchy of family members. So for example, if you die and you’re not married, then your estate would be divided between your children. If you don’t have any children, it goes to your parents and then your siblings and so on down the family tree.

If you die and you have a legal spouse then it can become even more complicated. People just think that their spouse will get everything, but if there’s children involved as well, the estate gets divided up differently to how you might think. That really can cause problems and stress for families. 

So by doing a will you can actually negate all of that and keep it as per your wishes. It mitigates family disputes – and you’re also streamlining the cost side of things. By getting rid of potential family disputes you avoid extra legal costs. You’re maximising what’s in the estate and therefore what’s left to your loved ones.

My children will be looked after by my family.

I’ll give you an example. Say you’ve got two children and both parents pass away. That leaves the children in a horrible situation. What happens if you have siblings on mum’s side and dad’s side who don’t get on. Perhaps they both think they’re going to be the best guardians for the children. 

They wish to argue that case and want to be legal guardians. In that situation, there’s a danger that social services will get involved and scoop the children up into the care system.

I’m not talking bad of the care system, but it’s not something that you would necessarily want to expose your kids to. They would be in that system until legal guardians could be appointed and that may take weeks or months. That could be very traumatic for your children. So it’s preferable to appoint guardians within your will – it’s quite a simple process that will minimise that possible situation. 

Let’s remember it’s very unlikely to happen, but by doing your will you’re protecting your children’s guardianship. 

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My partner will get everything automatically.

That’s not necessarily the case. It can be, but a lot depends on the situation. If you die without a will, the rules of intestacy apply. That’s the government’s statutory set of guidelines of who gets what and in what proportions. 

But for your other half to automatically inherit you would need to be legally married or in a civil partnership. And it may not be as simple as that. Should you have children, they may also be entitled to a proportion of your estate meaning that your spouse could end up in a worse financial position than you’d expected.

If you’re unmarried, the rules of intestacy won’t provide for your partner at all. That means blood family members could benefit in their place – even though that’s not your intention. You might have been in a relationship for 10 years and haven’t seen the need to get married.

For all intents and purposes you are a family unit. But if you die without a will the rules of intestacy don’t recognise that. 

So your partner wouldn’t receive anything – it would be divided equally between your children. That’s crazy in today’s today’s age, but that’s the reality of it. It puts the surviving partner in a real pickle. Even if you didn’t have any children but owned a house together and had investments or savings, it could all go to other family members. 

By having a chat about your will you keep that control. You’re not outsourcing it to the government to decide. And bear in mind that if there’s no family to inherit, then the Crown ends up with all of your estate.

Marriage or remarriage will not affect my will. 

In the current age people are getting married, divorced and remarried quite often. And actually marriage revokes a previously-made will. So a will would last your entire life if you never married, or if you made it when you were married and you never divorce. 

I would always recommend doing regular reviews of your will – it’s very important to make sure that what you have in place at any time accurately reflects your financial position. 

Having said that, if you made a will a few years back and then meet someone and get married, that marriage revokes your previous will – unless it was made a ‘contemplation of marriage’ clause. By saying you’re in contemplation of marriage to a future husband or wife, that will wouldn’t be revoked. It would still be legally enforceable. 

If you’ve made that will prior to even meeting your new husband or wife it’s almost certain it would be revoked. So taking an hour of your time to sit down and make sure that everything is how you would like it to be, is well worth doing.

I can amend my will at any time. 

You can’t simply make changes to your will. It’s a legal document that requires signing and dating and co-signature by two witnesses who have seen you put pen to paper. 

If you don’t have witnesses then it’s not legally enforceable – it hasn’t been signed correctly. If you have signed it and then it’s been witnessed you can’t just simply make changes to it at a later date.

Making changes has to be done officially and it’s usually done by what’s called a codicil, which is an amendment to your will. I would always recommend if you want to make any changes to go through the process of having another review. 

If you store wills with us you get free amendments. So it’d just be a case of picking up the phone or dropping me an email to make a change. I would do that all for you and then come out and see you, we could sign and witness it again. It’s all legally binding and that simple. But you should never make your own amendments to your will – it would invalidate it.

I can cut family members out of my will.

You can do whatever you want in your will, I suppose, but there are a few caveats. Whilst every family is different and it may be your wish to leave family members out, it’s not actually as simple as you may expect. 

Family members can potentially contest your will on the grounds that they expected to receive an inheritance from you. If they’ve been deprived of that perceived inheritance they can appeal it. This happens more regularly than you would think and can incur massive costs on the estate. 

That could reduce what you’re going to be leaving to your family as a whole. Careful consideration should be given to this when discussing your estate planning objectives, and we go through this with all of our clients. It’s one of the things that highlights the importance of seeking advice from someone who knows how to do estate planning.

It’s very specialised and you need to know what you’re doing to be able to effectively write people out of your will and estate. We will give you our knowledge and expertise from having dealt with this over many years to help you make that decision. 

All my debts and any contracts will come to an end with my death.

Unfortunately this is a myth. It is not true. If you die with any debts outstanding they will need to be paid from your estate. These payments come out before your residuary estate is divided up between your beneficiaries. 

Ultimately when you pass away, if there’s any inheritance tax liability, that and any debts and funeral costs come out of your estate first. Whatever’s left is called your residuary estate and you can then choose how to divide that up between all your loved ones. 

If your debts exceed what your estate is worth then some creditors would have to write off those debts. But should it then transpire that your executors have distributed that estate prior to paying those debts, they could be personally liable for repayment. 

So it’s very important that your executors do everything in the right chronological order. Tax, debts and funeral expenses come off first. Whatever’s left is distributed as per the wishes contained within your will. Any other way around could be dangerous for your executors.

I already have a living will. 

A living will is a legal document. It’s not the same as a will, though. It might sound the same, but a living will is effectively a document allowing you to decide how you would like to receive medical treatment when you can no longer make decisions for yourself. 

It enables your loved ones to speak to doctors or medical professionals on your behalf, rather than doctors making decisions for you that could be contrary to your wishes. I’ll give you an example. If you’re a Jehovah’s Witness and you would not like to receive a blood transfusion, a doctor may not necessarily know that. They may see you in a medical condition where you need treatment. If you have a living will in place you can detail that you would not like to have a transfusion – and your family members or whoever you’ve appointed can convey that to the doctor for you. The doctor has to respect that.

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Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.

Lasting Powers of Attorney aren’t that important.

There are two types of Lasting Powers of Attorney (LPA) which I’ll explain in a second. But they’re one of the most important documents that we deal with – if not the most important.

It’s a way for you to let your loved ones take care of you while you’re alive. For example, if someone has ended up in ICU and has been unconscious for a couple months, they can’t look after their own affairs. Power of attorney allows people you trust and appoint to look after that.

They can approach different institutions, be that banks, solicitors dealing with your house sale, pension providers or something as simple as Sky TV. The company has to deal with that attorney as though they are yourself because you’ve given them that power. 

There are two types of LPA. The first is Property & Financial, where you can appoint one or more people to act as your attorney in regards to your property and finances.

It’s very important. You might have investments – say you have a financial advisor managing a portfolio of investments for you. If you have this power of attorney they can continue with those investments when you’re incapacitated. If you don’t have an LPA, your investment portfolio will be liquidated and popped in a 0% bank account. The idea is that no one can take advantage of you whilst you’re unable to to deal with your affairs. You then come out of the coma and find out that your high performing investments have had zero growth for months. But that’s the government’s way of protecting you. 

A property and financial LPA mitigates the risk of that happening. Your attorneys can manage those investments on your behalf whilst you’re unable to. It’s also important if you’ve got rental properties. If your tenants stop paying rent or you need some work carried out on the property, people can do that for you in your absence. 

The other type of LPA is for the medical side of things: Health and Welfare. That could be anything from dealing with your GP to hospital doctors, dentists and care homes. It enables your attorneys to talk to these professionals as though they are yourself. It’s a good way of making sure that your wishes are accurately reflected. 

They’re probably one of the most important estate planning documents – maybe more so than wills – because while you’re alive and unable to make your own decisions it can be really stressful for your family members. They want to look after you, but the institutions which are meant to have your interests at heart won’t discuss things with them. 

By having LPAs in place you’re minimising the risk of that happening and making everything that that bit easier for the family unit.

I have Lasting Powers of Attorney so my attorneys will deal with my estate after my death.

As soon as you pass away that power of Attorney ceases to have any legal effect. The will, in contrast, is a legal document that has no power whilst you’re alive. But once you pass away the powers of Attorney cease and the will takes effect, so they dovetail nicely for estate planning purposes.

That’s why you need both sets of documents. If you wish your attorneys to look after your affairs when you pass away, then appoint them as executors of your estate under the terms of your will and as Attorneys under your LPA.

If you don’t have both documents then you’re going to potentially find yourself in a position where they can’t deal with your affairs.

Making a will is complicated and expensive. 

It’s complicated for us, because we have to accurately reflect the client’s wishes, but to a client it’s not complicated. We will sit down with you and discuss everything. 

One of the first questions I ask is what you want to achieve so that I can keep that in the forefront of my mind. We try to streamline it and keep it as simple as possible for you. Whilst there are various different options available, they might not all be relevant. 

It can be expensive – it depends on what your wishes are. Everyone’s estate is different. Some people may just want a straightforward, simple will which is not very expensive at all. But then other estates, which people may want to leave in specific ways, may require more in-depth trust planning. That can then increase the cost. 

Unlike a solicitor, we don’t get you to sign up for an hourly rate at the beginning and give you a massive bill at the end. We will discuss everything with you and confirm the cost, with a breakdown of what those fixed fees are. It’s all upfront. There’s no hidden costs whatsoever.

It’s better to have something in place than nothing at all. 

This one is true. It goes back to what we’ve been talking about – if you want to be in control of your estate you need to proactively do something. If you don’t do that, you’re leaving your estate open to the government to decide who gets what – which is a bit of a lottery. 

With some family units the rules of intestacy may end up representing your wishes, but that’s not the case for the vast majority of people. Sitting down and having a no obligation chat with us is just going to take an hour’s worth of your time. If you don’t like what you hear you can walk away. It costs you nothing financially. 

So have a chat, see if you need to do something and we’ll tell you how much it will cost. If you like the sound of it then we can get it in place. That way there’s minimal risk. If you don’t do anything then you are opening your family up to that risk.

My will is private and no one other than my executors will see it after I die. 

Your will is private before probate is granted, and once you die the only people that have the right to see the will are the executors. At their discretion they can show it to anyone else – the beneficiaries of specific gifts or of the estate as a whole, but there’s no duty to do that. 

There certainly is no duty to disclose the will to anyone who feels they should be a beneficiary but isn’t. After probate is granted, things change because it is then a public document. 

Having a will means my executors won’t need to apply for probate.

You’d likely have to apply for a grant of probate when dealing with anything other than a very small or simple estate, where perhaps the person who’s died was either single or widowed. 

You will definitely need to apply for it if you need to sell a property on behalf of the estate,  because the Land Registry will not change the registry without sight of that Grant of Probate. 

If any banks or other organisations say that they need to go into probate to release the funds then you’re going to need a Grant of Probate. On the flip side, you wouldn’t need to apply for it if the property or bank accounts of the person who died were held jointly with someone who’s still living. These would transfer into their sole name. If the estate consisted only of cash and personal belongings, probate might not necessarily be needed.

An estate of under £5,000 might not need probate. Some banks are happy to release funds off the basis of a death certificate for a certain amount. So it’s on a case-by-case basis. I would always recommend going through the application to get a Grant of Probate because it means that you can deal with the entirety of the estate with no hidden problems later down the line.

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