Twenty-eight million people in the UK currently have no will, according to new data* published this month.
Writing a will is crucial to ensure a smooth process of wealth transfer for your family, and efficient inheritance planning can save you thousands in Inheritance Tax (IHT).
If you have no will in place, you have made no formalised plan for dividing up your estate when you die. It could also leave large portions of your wealth subject to Inheritance Tax, which is paid at 40% on any funds above the tax threshold (currently £325,000 per person or £650,000 for a married couple). As a result, it is possible that proper will planning could pay for itself many times over, through savings on tax and legal costs.
Furthermore, the data implies that 65% of people with children under 18 have not written a will, potentially leaving their children without a formalised inheritance. A will can also nominate preferred guardians for children, if they are orphaned before they turn 18.
If you die without a will (known as dying intestate), specific rules apply to dividing your wealth. Contrary to popular belief, a surviving spouse is not automatically entitled to inherit everything.
In the case of a married couple in England and Wales, the surviving spouse receives only the first £125,000 from the estate, plus a half of the remainder, with the other half of the remainder passing to the children when they turn 18. (In N. Ireland the spouse receives the first £250,000; in Scotland the rules depend on what other family members exist)
Furthermore, an (unmarried) partner is not automatically entitled to a penny - the idea of a common law husband or wife with similar rights to a married spouse is a myth.
Danger of an out-of-date will
The research also concluded that, of those who do have a will, 4 out of 5 have not updated them in the past 10 years.
At the same time, 10% of people have undergone a change of relationship (i.e. divorce or remarriage) in the last 10 years and have not updated their wills to reflect this. This could mean that their estate could still be left to a previous partner, with their current partner losing any entitlement.
From an inheritance planning point of view, an out of date will can be as bad as no will at all.
Property Issues
Of those who have not revised their wills in 10 years, 23% have bought or sold a property in that time, which means that their will does not reflect their property ownership.
Investment Issues
The same would be true of any new savings accounts or investments made during that time. Almost a third of respondents (31%) said they had made significant investments in the last 10 years, which would not be included in their will.
*Survey of 2,005 British adults by Opinium Research, weighted to nationally representative criteria, published by Unbiased.co.uk
