The Essential Guide to Estate Planning
LegalWills.co.uk
is dedicated to providing services related to advance
directives, including the creation of financial and estate planning documents
such as wills (Last Will and Testament),
Expatriate Wills,
Living Wills and
Power of Attorney. Below are some
questions and answers related to financial estate planning.
What is estate planning?
Firstly, you need to understand what is meant by your "estate". This is everything that you own: your house, your possessions, your bank accounts,
pension, insurance policies, your car, jewelry. Every asset that you own, when put together, becomes your estate. Particularly once you have died.
When you die, every asset that you own is pulled together to form your estate. It will then be managed by your "estate administrator",
otherwise known as your "Executor" or your "estate trustee", who is appointed in your Will. This person has the responsibility
to gather up your estate and then distribute it according to the instructions in your Will.
However, estate planning goes a little beyond just your Will. A complete set of estate planning documents is considered to be your Last Will and Testament,
a Lasting Power of Attorney for property and financial affairs, a Lasting Power of Attorney for health and welfare, and an Advance Directive.
We also feel that a documented record of your estate should be an important part of your estate plan,
and we help you to create this using our LifeLocker™ service.
Do I need a Will?
Every adult needs a Will. It won't actually do anything until you have passed away, but waiting until just before you die is not an estate planning strategy.
There is never a situation where dying without a Will makes sense. Traditionally, writing a Will was expensive and inconvenient. But now,
with the power of computers and the Internet, and with interactive Will writing services like the one at
LegalWills.co.uk, Will writing is no longer a once-in-a-lifetime activity.
You should prepare your Will as soon as you become an adult, and then update it throughout your life as circumstances change.
Your Will serves two main functions: 1) You can make key appointments (your Executor and Guardians for your children), and 2) You can create a
distribution plan for your estate. This includes explaining who will receive your home, car, and other possessions, as well as making charitable bequests,
or even giving something to your friends. If you have a prized possession that you know would be appreciated by a particular individual,
your Will allows you to ensure that the right things go to the right people.
Without a Will, the courts will make your appointments for you. This means that a judge would be appointing a guardian for your children on your behalf,
without having any real knowledge of the parties involved. The judge would certainly not know about your parenting philosophies,
spiritual beliefs and the friendship and trust that you may have for friends and family members.
Without a Will, the courts will also distribute your estate for you. Specifically, if you are married, your spouse will receive the first
£250,000 and then, if you have children, your spouse will receive half of the remainder, with the rest being divided between your children.
It is safe to say that hardly anybody who writes a Will comes up with a distribution plan like this, because it creates significant problems
and could even force your spouse out of the family home.
How do I write a will?
There are three approaches to writing a Will:
- You can use an estate planning solicitor. This is the traditional approach and has the advantage of allowing you to discuss particular
legal peculiarities with your situation. The solicitor may even be able to write custom clauses for you if you have a convoluted
idea for how you want to distribute your estate. It works particularly well for conditional bequests where a certain event may trigger
a certain distribution plan.
However, a solicitor comes with certain disadvantages. It is expensive and inconvenient, not just to write the Will, but also to make updates.
As a result, some solicitors' Wills are actually less detailed, because they try to cover all future scenarios, knowing that they need to
"future-proof" the document. So rather than creating trusts and guardianship for individual children, the Will typically refers
to "whichever children happen to be alive at the time of my death". Solicitors will also typically write themselves into the Will
as the Executor (an extremely lucrative side business to Will writing which will cost your beneficiaries about five percent of the total value of your estate).
- The second approach is writing a Will yourself, or using a blank form Will kit. This is the most affordable way to prepare your Will,
but the most difficult to get right. Most of the publicised issues with do-it-yourself Wills come from blank form kits, as they expect
too much of the person using the kit. For example, there may be a whole blank page asking you to list the "powers of the Executor",
which for any layperson is almost impossible. The blank kits cannot include correctly worded trusts, or alternate plans, and sometimes even omit a
residual clause – a requirement for any well-drafted Will. One of the most common errors is that people attempt to list all of their
possessions in their Will, not understanding that their possessions change over time, and a Will should not be edited manually with pen marks
once it has been signed. In general, these Wills are extremely poor, and often do not work at all.
- Thankfully, there is now a middle ground that gives you a solicitor-grade Will at the cost of a blank form kit, using sophisticated software
that guides you through the process of writing a Will. This type of service is offered through
LegalWills.co.uk.
The service at
LegalWills.co.uk
uses the same software used by estate planning
solicitors across the UK, but gives you direct access to it. The final result is usually word-for-word identical to a Will prepared by a solicitor.
But the service costs about 95 percent less than a solicitor, and your Will can be created in about 20 minutes, on an iPad, in the comfort of your living room,
in the evening after putting the children to bed. It can also be updated at any time, from anywhere in the world.
These services used to be recommended if you needed just a simple Will. But they have become more sophisticated over the years.
Our service allows you to name guardians, create trusts for young children, lifetime trusts so that you can leave a home to a spouse
who is not the parent of your children whilst protecting your children's interests. Our service allows you to prepare a Will
for your UK assets when living overseas, and also allows you to include a trust for the care of pets.
With a Will writing service like ours, you can also be much more granular in your specific bequests. Some people write pages of different
bequests to difference charities and individuals, so you could leave £500 to your friends for a drink in your honour, £1,000
to your niece to travel the world, your Bobby Moore England shirt could go to your nephew, your favourite necklace to your granddaughter.
Lengthy lists of bequests are sometimes frowned upon by solicitors due to the extra work involved for them, but using our service you can
make it as detailed as you wish, and take as long as you like to get everything just right.
Does my Will have to be probated?
Probate is one of the most misunderstood parts of estate planning, because it is quite different across different countries.
If you research the Internet for information on probate, there is a lot written from a United States perspective that doesn't really apply to the UK.
Including strategies for avoiding probate.
Probate is simply the process by which your Will is validated as your official Last Will and Testament, and your Executor is given the court
authority to act as your estate administrator.
Many people think that you can gather up a person's assets by going to a bank, showing them the Will and explaining that you are the Executor.
The problem is that the bank has no way of knowing whether this Will is in fact the most recent Last Will and Testament. Or whether it was signed
appropriately by a person of sound mind, with no outside influence and nobody pressuring the testator into signing something they didn't want to sign.
In short, a bank cannot possibly know whether the document in front of them is a legitimate Last Will and Testament.
Instead, they require a "Grant of Administration" or "Grant of Letters Probate". This is a document given by the probate
courts to your Executor that authorises them to act as the Estate Administrator, once the Will is validated and any challenges to the document have been dealt with.
You cannot easily avoid probate unless there are no assets, or if all of the assets are jointly owned and going to the other joint owner.
Do I need a Power of Attorney?
This is a difficult question. Everybody needs a Will, because everybody will die. Dying without a Will creates a tremendous burden on your family and loved ones,
so there is never a good reason to not have a Will.
A Power of Attorney usually only comes into effect under specific circumstances, most notably when you lose capacity to handle your own affairs.
A Power of Attorney may never come into effect because you may never find yourself in that situation.
However, if you ever did lose capacity, the document is invaluable. It allows somebody to take care of your finances,
pay your bills, and access your bank accounts. Most notably, this is used when a person goes into a nursing home and it must be paid for.
It allows somebody else to make payments on your behalf out of your own funds.
Unfortunately, once you lose the capacity to handle your own finances, it is too late to prepare a Power of Attorney.
So it is best to prepare this document at some point in your life at a time when you are capable. It them comes into effect when you lose capacity.
How do I create a Power of Attorney?
There are many services that claim to help you to prepare a Power of Attorney. Even some Will writers and solicitors offer this service. You don't need them.
A Lasting Power of Attorney must be registered with the government in order for it to be a legally valid document.
The government has provided an online interactive tool for preparing your document.
The tool is free (so anybody offering this service for a fee is ripping you off), and the submission fee is currently £82 (although this seems to change every time we look).
You should prepare your Lasting Power of Attorney using the government's online tool.
What is an Advance Directive?
A Power of Attorney for Health and Wellness allows you to appoint a person to make medical decisions on your behalf.
However, it does not include any of your wishes for treatment. You can at any time express the types of medical treatment
you wish to receive if you were ever in an irreversible terminal condition. You can do this through an Advance Directive,
which we include within our Living Will™ service.
Why do I need a LifeLocker?
Typically, a Last Will and Testament includes instructions for your "entire estate". It would say something like "I leave my
entire estate to my wife, Jane Smith", or "To divide my entire estate equally between my two children".
Your Executor has the responsibility to gather up your entire estate, and distribute the estate to your beneficiaries.
The trouble is, your Executor probably has no idea what constitutes your entire estate. They may know about your main bank accounts,
but you may have online accounts that must be dealt with, bank accounts that aren't a part of your daily banking,
you may have cash or other assets that aren't known to everybody else and you would rather keep it that way.
The MyLifeLocker™ service allows you to prepare an Executor Handbook.
You can list all of your assets and important contacts. It can include ongoing subscriptions that need to be cancelled, your telephone and Internet companies,
your utility bills. Everything that the Executor must take care of as part of the estate administration. But none of this information is made
available until after you have passed away. Therefore, you can ensure that the right information gets to the right people at the right time, and not before.