Why you should write a will
Nobody wants to think about their own death, or what would happen if they lost mental capacity and needed someone to make decisions on their behalf, but these are matters you can't afford to ignore.
As you go through life, there are certain documents you need to draw up to help you plan for the future, including a will and a Lasting Power of Attorney (LPA). Getting this paperwork in place may involve some tough conversations but you must do this while you can still act.
"These are sensitive subjects to talk about," says Jane Whitfield, solicitor and chair of the Law Society's wills and equity committee. "But acting now will help relieve a massive amount of stress later. It could be the difference between paying a few hundred pounds now or a few thousand in the future."
This is a view shared by Claire Henry, chief executive of the Dying Matters Coalition, who says that by talking openly "we can spare our loved ones from dealing with the fallout if we haven't got our affairs in order".
She adds: “Talking about and planning for death is nothing to be afraid of. Once we have our plans in place, including writing a will, we can stop worrying about having to do it and get on with getting the most out of life.”
In 2015, the Ministry of Justice launched its 'Choice, not Chance' campaign, aimed at encouraging people aged between 25 and 50 to get a will and LPA in place – and also to sign up to the Organ Donor Register.
Here, we take a closer look at why it's so important to plan ahead – no matter how old you are.
Why it’s essential to have a will and keep it up to date
According to research from the IFA search engine, Unbiased.co.uk, more than half of UK adults (59%) do not have a will.
Die without one, and there is a risk your loved ones may not get the money, property and belongings you want them to have.
It can also leave costs and complications to relatives left behind. "Making a will is one of the most important things you will ever do," says Paul Green from Saga. "Without one, your loved ones' financial future could be at risk of uncertainty, emotional turmoil, or drawn-out disputes."
The rules of intestacy
If you don't have a will, your assets will be divided according to the rules of intestacy rather than according to your wishes. If this happens, you shouldn't assume that the people you intend to benefit will do so.
In October 2014, the rules of intestacy were changed in an attempt to offer more protection to close relatives. These were the first significant changes to the rules since 1925.
But while some groups have benefited – such as married couples and civil partners – unmarried couples still lose out. This is because one cohabiting partner still does not automatically have rights to the other partner's estate if they die without leaving a will.
"A will is the only way to ensure the right people benefit from your estate when you die," says Danny Cox, a chartered financial planner at adviser Hargreaves Lansdown. "This is particularly important for cohabiting couples, as well as extended families and complicated estates, such as those which involve business assets."
By writing a will with a solicitor you may also have the opportunity to structure it in a way that ensures more of your estate goes to your loved ones, without a sizeable chunk being paid in inheritance tax (IHT).
"Dying intestate also means that you would not be able to leave a charitable gift," adds Mr Green. "And if children are involved, your family may not have a say in who becomes their legal guardian."
The cost of writing a will
Cost puts many people off writing a will, but it does not have to be expensive.
If your affairs are very straightforward, you could consider buying a DIY kit. With Which?, for example, the simplest package for an unmarried person starts at £99, and for a couple, prices start at £156; visit http://wills.which.co.uk/. With online will creation tool Affio, prices start from £50; visit https://www.affio.co.uk/#price.
That said, if your affairs are complex in any way, you should go to a solicitor. A basic will costs between £100 and £300. Mirror wills, designed for couples who have very similar wishes, usually cost less than two individual wills.
"It is possible to prepare your own will, and this can work for the most simple of situations – and perhaps if all assets are going to a spouse," says Patrick Connolly, a certified financial planner at adviser Chase de Vere. "However, if any conditions are added or if there are additional complications, doing it yourself is a risky step to take. If you get it wrong, your family could be the ones who suffer."
Useful sites for finding a solicitor include the Law Society (Solicitors.lawsociety.org.uk), the Society of Trust and Estate Practitioners (Step.org/for-the-public) and the Institute of Professional Willwriters (Ipw.org.uk).
There is no set age at which you should make a will. The key is to make one sooner rather than later, as you don't know what might happen in the future. Once you have made yours, it's vital to keep it updated. Major life changes, such as marriage, children and divorce, are likely to mean you need to update it.
You could do this by adding a note to your existing will – called a codicil. From a cost of around £50 upwards, this is usually cheaper than writing a new will. However, a codicil should only be considered for minor amendments to prevent complexities raising questions over your existing will.
Why you need to make a lasting power of attorney
At some point in our lives, many of us will develop dementia or suffer a stroke.
Research from the Alzheimer's Society shows that 850,000 people in the UK have a form of dementia, and that in less than 10 years, a million people will be living with the condition.
And the Stroke Association says stroke is the fourth single largest cause of death in the UK (second in the world) and more than a third of the 1.2 million survivors in the UK are dependent on others, with one in five cared for by family or friends.
Yet few people are willing to think about the consequences of their health deteriorating to such an extent that they can't make rational decisions themselves.
"If an individual becomes unable to make choices about their financial affairs or their welfare due to old age, illness or an accident, there isn't an automatic right for their next of kin to make decisions on their behalf," says James Antoniou, head of wills at Co-op Legal Services. "This is where a Lasting Power of Attorney (LPA) can make all the difference."
The problem is, as worrying figures in research carried out by Ipsos Mori (commissioned by the Office of the Public Guardian) in 2014 show, 45% of those over 45 are not aware of LPAs.
So what exactly is this document? An LPA lets you appoint someone to make decisions if you are not capable of doing this yourself.
You can nominate one person to handle your finances and property and another person to make decisions about your health and welfare – or the same person for both. This will usually be a family member or close friend who is familiar with your circumstances.
"With an LPA in place, your attorneys will be able to deal with bills, bank accounts, investments and the buying and selling of property on your behalf," says Mr Green. "They will also be able to make decisions about medical care or life-sustaining treatment."
What happens without an LPA?
If a person lacks capacity and there is no LPA in place, someone (usually a relative), must apply to the Court of Protection to become a deputy and take care of that person's welfare and financial affairs. However, the process takes time and can be costly.
"The application process alone can take four to six months to complete," adds Mr Green. "The cost of applying can also be expensive, with ongoing annual fees. Plus deputies have to submit annual reports to the court."
Many people in this situation are often in shock and ill- prepared for the legal and financial challenges they face.
While you might not think you need to draw up an LPA until you're much older, it actually makes sense to do so while you're still young, just in case the unthinkable happens, such as an accident.
It's also worth noting that you can only set up an LPA while you are capable of understanding the nature and effect of the document – and are able to sign it.
Setting up an LPA
LPAs are easy to put in place. To set one up yourself, simply download the forms or fill them out online at Lastingpowerofattorney.service.gov.uk/home.
A fee of £110 must then be paid to register the LPA with the Office of the Public Guardian (although it may be possible to get a discount if you are on a low income or receive certain benefits).
For more information visit https://www.lastingpowerofattorney.service.gov.uk/home.
While the forms for an LPA are quite straightforward to fill out, you do need to be careful, as any incorrectly completed forms have to be resubmitted and paid for again.
You can also get help setting up an LPA with Unforgettable.org, an organisation which offers dementia products and services in partnership with charities such as the Alzheimer’s Society and Carers UK. The site offers a free and easy-to-use online questionnaire which automatically completes your LPA forms for you.
Alternatively, a solicitor or local advice agency can help you set up the LPA and register it. For example, with the Co-op Legal Services, prices start from £180.
If you die without making a will, your estate will be divided up and distributed according to a set of complicated procedures laid down by the law as set out in the Administration of Estates Act 1925. The more complicated your life, the more complicated the intestacy laws after your death. Given that 60% of registered deaths last year were intestate, according to Title Research, the only way to ensure your estate is divided according to your wishes is to make a will.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.