Crystal ball gazing when making a will
It is always difficult to decide how best to divide one’s estate between loved ones when making a will. There is no concrete way of knowing what your assets will be when you die, or what the position will be of those in the family whom you may wish to benefit. Parents in particular are often concerned about the possibility of divorce cropping up in the future and losing family assets as a result.
We do not have a crystal ball to consult when advising clients, which would be very useful both when considering their personal futures and when wondering what the likely tax regime will be when they die!
One option is to use what is known as a ‘flexible’ will, incorporating a discretionary trust to hold some or all of your assets on death. Although complicated legally, in practical terms for those making a will it simply means that your trustees (who must be chosen carefully) will divide your estate as they see fit after you have died.
A separate letter of wishes is then prepared to tell those trustees exactly what you want them to do. Such letters could include instructions to look after your spouse for the rest of their life, or to divide the estate equally between your children, or to make whatever arrangements work best in terms of tax-saving at that time.
Those wishes are not legally binding, and so it is most important that you choose trustees in whom you have complete faith to follow your letter. The incorporation of a professional trustee can give some comfort here.
This type of will is useful because it means that no beneficiary has any right to your estate, and so if they are in difficult circumstances such as addiction or other personal problems, the trustees can choose how to look after them without jeopardising the family wealth. The trustees could, for example, purchase a property for that beneficiary to live in rent-free, or provide them with a regular income rather than a capital sum outright.
Another benefit is that once the will has been made, any update to the testator’s wishes can simply be made by a new letter. There is no need to prepare a new will each time. This can be useful when family circumstances are fluid.
Such wills tend to be popular with clients due to their flexibility, but careful analysis and explanation is required before they are made as there are various tax consequences to bear in mind.
If you are considering this type of will, specialist advice is available from all our offices.