By Andrew Megson, executive chairman of My Pension Expert
Although it is a depressing sentiment to acknowledge, the past couple of years have underlined the need for Britons to write a will. Amidst the uncertainty caused by COVID-19, one would expect to find many individuals getting their affairs in order – but this has not been the case.
Quite the contrary, recent figures from YouGov suggest that although the vast majority (82%) of Britons believe it is vital to have some form of will in place, the reality is that a staggering 59% do not actually have one.
This situation is very concerning. After all, dying without a will in place can cause various issues later down the line. As such, the issue must be addressed as soon as possible – starting with understanding the key reasons for avoiding the task.
Out of sight, out of mind
It is first important to address why exactly individuals are deterred from writing a will. Obviously, this can vary between person to person, but I would wager that there are a couple of common denominators at stake.
The first to consider is the fact that many people will think they are too young to create a will – some 76% of people under the age of 35, in fact. Adding to this is the fact that young people do not believe that they are ‘asset rich’ enough to warrant the creation of a will. For many younger members of the population, these will be valid points to raise. However, individuals do stand to gain some things from kicking off the process earlier, as taking an inventory of one’s possessions early on can make it easier to re-evaluate later down the line.
Another factor to contributing to the national reluctance is that Britons tend to be on the reserved side, when it comes to discussing subjects like death. There is a wealth of data pointing towards this outlook, with a recent study revealing that the majority (60%) of UK adults consider themselves to be reserved. Understandably so – this can be a very difficult subject to raise, and some people might decide to put things off until a later date.
Considering intestacy laws
Although valid reasons, these outlooks contribute to a very significant issue, leaving their final wishes in the hands of rigid Government intestacy laws. This means that a person’s assets will be divided amongst their immediate family when they die. This means that if an unmarried person with no immediate family dies without a will, their assets will be inherited by the crown – no matter their relationship status.
For example, a more complicated case might entail those who have specific wishes, or assets that they would like to allocate to friends and family. Under the inflexible rules, people who are married with children will have £250,000 worth of assets go to their spouse, in addition to the half of any remainder – the other half of the remainder will be shared between their children, even if the individual has different ideas about how they would like their assets to be distributed.
Evidently, these rules overlook unmarried partners, stepchildren, and any other close friends of the deceased, regardless of an individual’s expressed wishes and concerns.
These rules can also be extremely difficult to contest. Although unmarried partners and close friends can claim that they are entitled to support under the Inheritance (Provision for Family and Dependents) Act, this process can be very lengthy and comes without any guarantees of a positive result. And this can create unnecessary stress throughout an already difficult period.
Creating a tax-effective will
Similarly, family members will be vulnerable to unexpected inheritance taxes (IHT), should they opt not to write a will.
The current rules state that a spouse can receive the first £250,000 of their inheritance tax-free without a will. That said, any children of the deceased might be landed with a hefty IHT bill. Although IHT is unavoidable, one of the benefits of creating a will is the fact that individuals can manage their estate in more tax-efficient ways.
A good example of this is by allocating gifts in a will. Provided that these are allocated seven or more years before an individual dies, friends and family members will be exempt from paying IHT. To do this, individuals must refer to their assets as outright gifts in their will, by including the term “gift with reservation of benefit”. This can apply to an array of different assets, from fixed sums of money to property and shares.
Similarly, other people might look to Trusts to create a more tax-effective will, enabling beneficiaries outside of their estate to avoid any large IHT bills.
Shifting the status quo
Essentially, writing up a will as early as possible allows individuals to avoid many unnecessary stressors after a close friend or family member passes away. However, encouraging seismic behavioural change will inevitably take time, and will require a collective industry effort.
I would like to see legal and financial industry bodies to work together to better advertise the legal and financial benefits of creating a valid will. Additionally, they should improve access to legal guidance. These combined actions would certainly mark a positive start in addressing the national will shortage.
As I say, it will take some time before earlier will writing becomes the norm amongst Britons. However, with combined industry efforts, I am confident that many more individuals will be empowered to take control of their estate.
Andrew Megson is the Executive Chairman of My Pension Expert, the UK’s number one Advised Retirement Income Specialist. Founded in 2010, My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week.