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DYNASTIES, AND SOME NASTY THINGS THAT CAN HAPPEN IF YOU DIE

Richard Adams, solicitor with Crosse & Crosse in Exeter, looks at the latest trends in will planning, and some of the ramifications of will absences.

Wills

Have you established your dynasty yet?

Oh, didn't you know? Everyone's got one, these days.

I find the number of ‘ordinary' couples I now have to advise about founding dynasties, by which I mean establishing trusts, appointing trustees, deciding to whom property will belong for generations to come, astounding. Helping them to do this is not how I anticipated spending my legal life when I studied to be a lawyer nearly twenty years ago. Basic lectures on will-drafting didn't have too much to say about trusts. My impression was that trusts were for the upper, landed classes, or perhaps for the unusual situations that arise, such as disability.

But no longer. The present situation is this. Broadly, the Government only allows individuals to leave assets with a value of up to £275,000 without paying death duty. There's an exception for gifts to charity, and for married couples of course - but the spouse exemption doesn't help at all on the occasion of the second death, and as a result many people in Devon find themselves confronting the idea that their estates will have to pay significant chunks of cash in inheritance tax on death, simply by virtue of their being a homeowner with a few investments.

This has been brought about largely by the unprecedented increase we have seen recently in the price of houses. Investing in bricks and mortar seems to be both the British way and the thing to aspire to. This is a peculiarly British attitude: most of my French and German friends don't give it a moment's thought. They don't even try to buy - they rent.

Building land on the bit of our small island where development is permitted remains scarce and so the demand for houses pushes up prices. And just as soon as another means is found of making houses ‘affordable' the increased demand in the market raises their value.

I suppose most of us aspire to having a paid-for house with a few bob in the bank to top up the old age pension - nothing excessive, mind you, not what you'd call wealthy, just having saved a bit and at last, after twenty-five years of payments, the mortgage sorted out. And we're not talking about a de-luxe house here, three bedrooms, a bit of garden - and the Government wants to impose death duties on us? We've already paid tax on the money we've earned anyway...

The thing for a man to have used to be a will leaving everything to the missus when he goes (it'll be him to go first, women always live longer than men) and then on to the children. That'll do nicely. Takes an hour to do. That'll be a guinea, sir, please. And of course we'll be delighted to be the executors. Local solicitors, we can be trusted.

Wills like this are still the order of the day for tenants but for most homeowners they usually simply end up with a widow or widower who owns their own home, probably worth around £200,000 or £250,000, and a bit of savings, with the result that there's a hefty charge (40 %!) to inheritance tax on the second death.

Such simple wills are now routinely replaced with a will which doesn't leave everything to the surviving spouse on the first death, but rather sets up a trust and leaves a chunk of capital to that trust, so that the surviving spouse (who's a beneficiary) can continue to benefit from the trust. The advantage of this slightly elaborate arrangement is that the trust fund doesn't belong to the surviving spouse, and so it isn't subject to tax on the death of the surviving spouse.

The saving in inheritance tax can amount to 40% of £275,000 which is £110,000, which the children will say is far better in their pockets than in those of the tax-man. And I say in that case pass my bill for the wills to the children since it's they who'll benefit from them.

No wills

The other unpleasant current trend is for fights when the chap suddenly has a heart attack in his late forties leaving a new partner, whom he's been with for a couple of years, and children from his earlier, now dissolved, marriage(s) who don't get on too fabulously with the new partner.

Of course, he doesn't have a will. Or perhaps he does have one, but it's no longer appropriate as it was written when he was married to his former wife.

He's living in his new partner's house. His belongings are there. Some of them he brought with him when he moved in. Others have been purchased by him since, with the intention that they'd still be his alone - his camera, his laptop - while others were intended to be joint (CDs, new sexy thin TV, latest American fridge). Some were purchased jointly. Others were purchased by him but while it was his money, she said if he bought that, she'd buy this (rather than pay half each which is pointlessly complicated) so that should be joint too.

Who gets what? Who's legally entitled to what? (These are not the same questions of course, possession being nine-tenths of the law). She'll say they're hers, and since she has the key to the door it's not easy for the family to recover what rightfully should actually belong to them. If she's the one signing the forms at the crematorium (and perhaps the children, not wanting to be unpleasant, will allow this so she doesn't feel shut out by his family) then she'll control the ashes and decide what happens to them too.

But it is easier for the children to enforce their rights if they have a will written in their favour than if there's nothing in writing.

And the partner will be entitled to very little indeed if there isn't a will in her favour. A few CDs and a fridge won't be much compensation for the car and the bank account he'd have wanted her to have had he known he was going to die next week. What's worse is that since he never did get round to divorcing his wife, she's entitled to most of the estate if he dies without a will, despite the fact that they haven't had a good word to say about each other for the last three years.

Life's never dull as a probate lawyer.

Do make a will - one never knows what's around the corner, and since we lead complicated lives a will tailored to you and your family is an essential piece of kit to have. And once you've got one, keep it under review. Make sure it still works and says the right things.

Your friendly local solicitor will be delighted to help you with this.

This article appeared in the January 2006 edition of Devon Today and was correct at time of going to press. Please contact us for up-to-date information