Will you or won’t you? You should be thinking about life after death – for your relatives, at least, say Sue Medder and Charlie Tee of Withers
AS SHOWN BY the recent BBC2 show, Can’t Take It With You, making a will is fundamental, yet it is estimated that 70% of the British public do not have one. As families and the assets they own become more complex, the scope for assets not passing as an individual would wish has increased markedly, and there has also been a concurrent noticeable rise in the number of wills which are being contested. We will briefly consider some of the issues to be considered when making a will (with particular reference to high net worth individuals) and some of the pitfalls which can arise if the process is not done properly.
When looking to make a will, it is important to consider both what assets an individual owns and also whom they should consider benefiting. Often, especially when considering high net worth families, there will be existing wealth planning structures which will need to be taken into account. A will in these circumstances must therefore be considered holistically alongside such other estate planning provisions.
As far as family members are concerned, wealthy individuals will often want to look at their particular assets and decide what should pass to which family member. Although equality among children is still usually the main aim, there may be certain assets which should not be divided but should instead pass to one individual child, with the others being compensated from elsewhere. This is most often seen in the case of landed estates where a prime concern is to ensure the long term survival of the estate, though can also be seen with regard to family businesses, where it might be felt that a child working in the business should have a larger stake than their siblings.
High net worth individuals are normally able to compensate the non-inheriting child from other assets but even so problems can arise if the children or family members are not expecting to be treated differently and so it is always worth considering whether it is appropriate to discuss one’s plans so as to ensure that all know where they stand. This will often prevent future disputes arising and may lead to the airing of any problems or preconceptions which can be easily dealt with during an individual’s life, but are much more difficult to deal with when they are gone!
A key consideration when making a will is who should be your executors and trustees. Both are crucial positions and, especially where one is looking to preserve flexibility in a will, should only be filled by those individuals in whom you place complete trust and confidence. Possible executors include your spouse, other family members, trusted advisors or individuals or entities who are already trustees of any existing trust or, most likely, a combination of the above.
Often, individuals will leave detailed guidance to their executors and trustees and many will discuss their wishes with them during their lifetime, so as to be sure that they understand both the family dynamics and the individual’s own wishes. Although there is no one right choice as to who should be appointed as your executors, if you make the wrong choice this can have repercussions for your family after your death and so the matter should be afforded due care and attention.
SIMILAR CARE AND attention should also be given when deciding who should fill the other key role which is often included in a will and which, for many people, is the driving force behind them making a will, namely, who should be the guardian of their infant children. When deciding upon a guardian, parents have to consider who would best fill their shoes if the worst were to happen and who they think will make all of the key decisions concerning their children.
Factors to consider include your prospective guardian’s attitude to schooling, religion, wealth and health as all of these factors will impact on your children’s lives. Again, it is crucial that you discuss matters in advance with any prospective guardians so as to make sure that they are happy to take on the role. Many people also like to make provision for the proposed guardian and their children in their will (say, as regards holidays) so as to try and make sure that there is no resentment between the various children, especially when one set of children are financially better provided for.
A final issue which can cause problems for high net worth individuals is the fact that there is often property in a number of different jurisdictions, as well as family members located across the world. It is crucial to ensure that any will and estate plan takes account of the different rules of the different jurisdictions so as firstly to ensure that the assets pass as the individual wishes (taking account of forced heirship rules where they apply) and secondly to ensure, as far as possible, that there are no mismatches between the various tax systems.
For example when considering couples with both a US and UK connection, although the US does not have any forced heirship, the US estate tax system is such that, unless a specialist US/UK will is put in place in certain circumstances, it will not be possible to get the benefit of both the UK spouse exemption from inheritance tax and the US spouse exemption from estate tax on the first death of the couple. A sensibly drawn up will, made with the benefit of expert advice, can ensure that there is proper tax planning in place and unnecessary tax liabilities can be avoided.
As we have shown, there are a huge number of factors to consider which will impact on the final form of one’s will, especially when one has complicated affairs and family life. In our experience nothing can beat meeting and talking to experts in the field who will be able to ask all the right questions and help work with you so as to enable you to arrive at the right solution for you and your family.
Sue Medder is a partner and Charlie Tee a solicitor at Withers LLP