SVR Charitable Trust

Putting your affairs in order

Advice from Deborah Beal, Associate Solicitor - Wills & estates at Thursfields, who are Worcestershire-based solicitors.

Putting your affairs in order can spare family or friends painful decisions and even financial difficulties that could happen if you don't make your wishes clear. Putting your affairs in order may also clear your mind of lots of worries, leaving you free to concentrate on the present. In this article, I am going to deal with the importance of making a Will.

A Will is one of the most important documents most people ever sign yet, surprisingly, more than two-thirds of adults die without a valid Will, causing a great deal of uncertainty at a time of heartache and distress. Making a Will ensures that whatever you have - no matter how much or how little - is divided up according to your wishes. It also safeguards the security of your loved ones and enables you to choose who handles your possessions after your death by acting as your Executor(s).

Making a Will is important because:-

If you die without a valid Will, there are certain rules which dictate how your money, property or possessions will be allocated. This may not be the way that you would have wished for them to be distributed and, if you leave no next of kin, your estate will go to the Crown. Your Executors (who take charge of your estate and wind it up) will also be chosen according to fixed rules and these may not be the most suitable to act.

To avoid these problems, it is important that you make a Will. . .

By making a Will, you can:

Appoint someone you know and trust to act as your Executor(s).
Nominate guardians for any young children who may be minors at the time of your death.
Make specific gifts to relatives, loved ones, friends or favourite charities.
Choose exactly what you want done with your property and assets after your death.
Express your wishes about your funeral and the disposal of your body.
Save your beneficiaries from paying unnecessary tax.

Providing for you loved ones is the most important thing to consider when writing a Will; however, once they have been considered, you may wish to leave a gift in your Will to support the work of the Severn Valley Railway. One way of doing this is to include a residuary legacy to the Severn Valley Railway Charitable Trust.

Types of gifts you can leave in your Will:

A residuary legacy is a percentage of your estate after everyone else has been provided for.
A gift of a fixed sum of money is called a pecuniary legacy. Please note that the value of this type of legacy will decrease over time, as the cost of living increases.
A particular named item left as a gift in your Will is known as a specific legacy; for example, property, antiques, jewellery or shares.
Legacies made on the basis of another event happening first are called contingent gifts. For example, your Will could state that a gift only applies if all other beneficaries in your Will die before you do.
A reversionary legacy is a gift which someone can benefit from in their lifetime. For instance, your house could be left for the use of a relative. When they die, it could pass to someone else, or to a charity.

Financial benefits of leaving a gift in your Will

Inheritance Tax (IHT) is a tax on the estate (the property, money and possessions) of someone who’s died. How much you pay depends on the value of your estate – which is valued based on your assets (cash in the bank, investments, property or business, vehicles, etc.), minus any debts. There’s normally no IHT to pay if the value of your estate is below the £325,000 threshold, or you leave everything above the £325,000 threshold to your spouse, civil partner, or a charity.

If neither of the above applies, your estate will usually be taxed at 40% on anything above the £325,000 threshold when you die, although there are other allowances and exemptions that may be available. Depending on your circumstances, if you give away your home to your children or grandchildren on your death however, your threshold can increase to up to £500,000 and, if you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million.

Leaving something to charity in your will may also save your beneficiaries money. When including a charity in your will, your donation is usually taken off the value of your estate before IHT is calculated, and can reduce your IHT rate (if 10% or more of your estate is left to charity in your will, IHT will be charged at 36% of the net value of your estate).

The SVR Charitable Trust strongly recommends taking legal advice on this subject if applicable to your circumstances.

Assessing your estate

Before you draft your Will, you should:

List everything that you own - your property, shares, investments, life insurance policies, bank balances, care and all your valuables and possessions.
Make a rough calculation of the value of your assets.
Decide which people and/or charities you wish to benefit from your estate.

Drafting your Will

It is always best to ask a legal advisor to draft your Will. he or she will know the correct form of words and can avoid ambiguities and misunderstandings. In the meantime, these three basic rules may be helpful:

Two adult witnesses must be present when you sign your Will. They must be of sound mind and vision. You must also be present when they sign the Will.
You witnesses do not need to know the content of your Will, but you must not use as a witness anyone who themselves, or whose spouse, will benefit from your Will.
The Will should set out the arrangements for distributing all your estate. It should appoint between one and four people as executors. It should also dictate who is to receive any residue after the specific sums have been allocated.

Let people know what you have done

It is essential that your executors know their role and where to find your Will, which should obviously be somewhere safe, for example, with your legal advisor or bank. Therefore, it is helpful if you brief your executors about this and also provide them with key contacts in respect of your bank account, insurance, investments, etc.

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Putting your affairs in order