Passing on your wealth – what to consider

20th November 2023

Planning what will happen to your estate isn’t always simple – here’s some expert advice on what to do if your situation is complicated.

At a glance

Even if you aren’t completely sure who you want to leave money to, making a Will is the most important piece of financial planning you may make.

If you’re not sure who to leave your estate to, or you want to leave people out of your Will, talking through your options with a financial adviser can help you decide.

Making sure the right people or charities inherit from you means your money will be doing lasting good, after you die.

You can’t take it with you when you go. But sometimes it can be very difficult to decide how your money and assets will be divided, once you die. Some of the most common questions people tend to ask are “What if I can’t decide who gets what?”, “What if my beneficiaries are too young to look after the money properly?” and “Can you leave someone out of a Will?” Even broaching the subject with other family members can lead to some emotional, sometimes heated exchanges. No wonder three in ten of us haven’t told anyone what we want to happen when we die – let alone made a Will1.

Why you should make a Will

However complicated the issues seem, dying intestate – without a Will – could be worse. If you don’t make a Will, your money may end up where you don’t want it to. But leaving money to those you love can make a real difference, and many people depend on that lump sum to pay school fees, or pay off a mortgage.

We understand that conversations around who to leave your estate to can be emotional. It can often help to have a financial adviser there, to explain choices and practical benefits of different options. Many SJP Partners form lifelong relationships with the families they advise, so they often know all the family members well.

It's easy to think that making a Will is the end of your estate planning. However, you should review it every time there’s a change in your family’s situation, such as new grandchildren, or a new relationship.

Knowing that your wishes will be respected after your death will give you peace of mind.

What to do if you can’t decide how to divide your estate

We form many meaningful relationships in our lives, and our Will is a way to remember, and reward those people. But in today’s society of blended families, civil partnerships, and second marriages, making your Will is rarely as   simple as leaving everything to your partner or children. 

Here, Sarah Murphy, Chair of The Law Society’s Private Client Committee, answers seven of the most common questions that lawyers encounter when things aren’t straightforward.

What if I can’t decide who gets what?

The first thing to know is, your Will isn’t set in stone. You can change it. So if you’re not sure who you should leave money to, don’t let it stop you making a Will. You can build a discretionary trust into your Will. This means that the trustees will decide what happens to your assets after you die. 

Since you appoint the trustees, you can choose people you know and trust. You should also leave a letter of wishes too. The trustees can use this as guidance on how to distribute the funds. 

You can amend your letter of wishes as many times as you like in your lifetime – and you don’t have to keep going back to your lawyer.

Do be aware, however, that a letter of wishes is just that – your wishes. It isn’t legally binding. The trustees can act according to their discretion, as well as taking your wishes into account. They may look at the relationship you had with the beneficiaries at the time of your death, or their current circumstances, and the tax implications.

What if the people I want to inherit my estate are children or too young to manage the money responsibly?

If you feel that your children are too young or not ready to be trusted with a large lump sum, it’s common to set up a trust for them. The trustees would be guided by you as to how to distribute the funds on their behalf – for example, by paying for their maintenance and education. Then you can state that they will receive the money at a certain age – for example, 21 or 25 – depending on what you think is right for the individual. Until then, you can rely on the trustees to make sensible decisions on your behalf.

What if my beneficiaries are vulnerable in some way?

Sometimes, if the person you want to inherit has a long-term condition and needs someone to look after them after you die, you can set up a discretionary trust or a vulnerable person’s trust. A vulnerable person’s trust can be very tax efficient, and you can make sure the money is invested in the right way so that the beneficiary is looked after for the rest of their life. You may want to consider setting up a trust like this during your lifetime, rather than waiting until after your death.

Can you leave someone out of a Will?

This can be an emotional decision to make, but as far as the law is concerned, you have complete freedom to act as you wish. It’s your Will, so you can specifically write out anyone, if you want to. You should be aware, however, that this may not stop those people making claims against your estate, after you’ve gone.  

For example, they could argue that you actually intended to include them but you were badly advised or didn’t have full mental capacity at the time of making the Will. These cases are time-consuming and expensive for your estate to defend, so it’s important to take advice before excluding someone who might expect to inherit from you. It might end up being counter-productive, in the long-term. So you should always take legal advice before finalising your Will.

The other aspect to bear in mind is, you can’t put legally binding conditions on how people spend the inheritance you’ve left them. Once they’ve inherited, they can spend that money on whatever they like. 

What if the people I want to leave money to die before I do?

Many of us will live into our 90s, even beyond. That might mean, for example, that a parent might outlive their child. You need to cover this off in your Will too, and confirm who should inherit if your intended beneficiary dies before you do. Otherwise, the gift will fail. It’s always worth thinking about this carefully and discussing various options with your lawyer so you have a plan B.

What if I don’t have any descendants to leave my estate to?

Some people put off making a Will because they don’t have children to leave their estate to, even if they’re married or in a civil partnership. And a surprising number of people assume that when they die, their partner or spouse will automatically inherit. This simply isn’t true, and you shouldn’t rely on it, since your partner’s financial wellbeing may depend on it.

If you don’t have descendants, or people close to you to leave money to, you can leave your money to anyone, or any organisation. Many people make substantial gifts in their Wills to charities or causes close to their heart. Since any money you leave to charity is tax-free, your gift will make even more of a difference. You’ll be helping those after you to create a world that you believe in, and care about.

Leaving money to charity can potentially reduce your Inheritance Tax bill. If you leave at least 10% of your estate to charity, the rate of Inheritance Tax chargeable on your estate could drop from 40% to 36%. 

Can you leave money to a pet?

You can’t actually pass your wealth onto an animal, but you can leave money to someone with the intention that they use it to look after your pet.

I acted for a lady a few years ago whose dog was the most important thing in her life. We structured her Will in such a way that someone had to commit to looking after her pet – before they found out that it also came with £10,000 from her estate.

Alternatively, you can set up a trust where the trustees can decide how much money to give to the person who takes on the pet.

Leaving a meaningful legacy

Money is only ever a means to an end, not the end in itself. But a meaningful legacy may enable your grandchildren to go to university, or that your family feels financially secure even after you’ve gone.

However you choose to do it, and whoever you leave it to, a legacy can be the best investment for the future.

Get in touch

Estate planning, trusts and tax need careful consideration, and it's important to ensure your Will takes into account all of your financial planning. So get in touch with your financial adviser, especially if your situation isn’t straightforward.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

Will writing involves referral to a service that is separate and distinct to those offered by St. James’s Place. Wills and Trusts are not regulated by the Financial Conduct Authority.

Sources

1National Will Register, 2023

Passing on your wealth – what to consider
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