How to Choose Who Inherits Your Estate

Deciding how your estate will be distributed on your death is an important decision with significant emotional and financial implications. Understanding what constitutes your estate and considering who should benefit from the belongings you have accumulated are all essential steps in this process.

In this guide, we will explore what is typically included in an estate, how to determine its value, and how to make the critical decisions about who inherits your assets. Whether you are just beginning to think about writing a Will, or looking to update an existing one, the Wills, trusts, tax and succession planning team at JMW will provide valuable insights to navigate these essential considerations.

What is included in my estate?

When considering estate planning, the first step is to have a clear understanding of what your estate actually comprises. Your estate is essentially the collection of everything that you own, and can often be more extensive than you initially perceive.

All of the following may be included in your estate::

• Property: this category is not limited to your primary residence but extends to any other property that you own. This could be property or land held in your sole name or owned jointly with another person.
• Financial assets: these are your liquid assets and investments. They include the funds in your bank accounts, savings accounts, and any investments such as stocks, bonds, mutual funds, and individual retirement accounts that pay out upon death.
• Personal possessions: this broad category covers all of the tangible items you own. This may include valuables such as cars, artwork and jewellery; it can also include furniture, collectibles, and items that hold significant sentimental value to you or potential beneficiaries.
• Life insurance policies and retirement accounts: policies and accounts that are not directly assigned to a beneficiary can become part of your estate.
• Business ownership: if you own or have an interest in a business, the value of your share of the company is considered part of your estate. The implications for the business will depend on its structure and any existing agreements among partners or shareholders.
• Debts and liabilities: your estate includes not just your assets, but also any debts or liabilities you have at the time of your death. These could be mortgages, personal loans, credit card debts, or other financial obligations.

Understanding the full scope of your estate is the foundation of effective estate planning. Not only does it help make information decisions about how your estate will be distributed, but it also plays a vital role in understanding the potential tax implications of your choices.

How can I work out how much my estate is worth?

Accurately valuing your estate is a critical component of effective estate planning. Here's how you can work out the value of your estate:

• List all of your assets: start by compiling a comprehensive list of your assets. This includes everything from properties and financial investments to personal possessions and business interests. Do not forget to include less obvious assets, such as digital assets or collectibles.
• Get professional valuations for significant assets: for substantial assets like property or unique items (including art or antiques), getting a professional valuation is crucial. Market values can fluctuate, and having an accurate, up-to-date valuation ensures that your estate planning is based on realistic figures.
• Assess your financial accounts: review your bank, investment and pension accounts. Ensure you understand the current balances and how these accounts are structured in terms of beneficiaries or ownership, as this can affect their inclusion in your estate.
• Consider your debts and liabilities: create a list of everything you owe via mortgages, loans, credit card debts, and any other liabilities. The value of your estate is essentially your assets minus your liabilities.
• Understand the impact of joint ownership and trusts: if you own property or assets jointly with someone else or have assets held in a trust, the way they are counted towards the value of your estate can be different. Legal advice can help you understand what portion of these assets is included in your estate.
• Review life insurance and retirement accounts: if not written in trust or assigned directly to a beneficiary, the payout from life insurance policies and retirement accounts may be considered part of your estate. Understanding the policy terms and how these payouts are treated can help you to calculate your estate's value correctly.

By evaluating each component and seeking professional advice where necessary, you can gain a clear and accurate picture of your estate's worth, which will allow you to plan how your assets will be distributed and prepare for any potential tax liabilities.

Who should I leave my estate to in my Will? Who should be provided for?

Deciding who should inherit your estate is a deeply personal choice, but it is also one that requires careful balancing of your personal wishes and your legal obligations. When determining who to include in your Will, consider the following:

• Spouses and civil partners: generally, these individuals are your primary beneficiaries. The law often views spouses and civil partners as being entitled to a significant portion of your estate unless otherwise specified, and if you do not write a Will, a spouse or civil partner is the first person who will inherit automatically under the UK’s intestacy laws.
• Children: whether minors or adults, children often have a legal right to part of your estate. Special considerations should be given to children with disabilities or those who may require long-term care, as you may wish to make provisions to support their ongoing needs.
• Children from prior relationships: these must be considered carefully in estate planning to ensure fair treatment, especially for those not legally adopted by you but whom you have raised or supported. You will need to balance the needs of children from different relationships and ensure that the provisions reflect your intentions and the relationships you have with each child.
• Former spouses and partners: divorce or separation introduces complexity into estate planning, especially when this involves ongoing financial obligations, such as child support. While a divorce may automatically revoke any bequests to a former spouse under your Will, it is important to update the document regularly to reflect your current wishes and legal status rather than relying on automatic conditions. If you are separated but not legally divorced, your estranged spouse might still have a claim on your estate unless explicitly addressed in your Will.
• Dependants: any other individuals who might be financially reliant on you, such as elderly parents or a sibling, should be considered. Assess their future needs and how best to provide for them through your estate.
• Extended family and friends: you may wish to acknowledge siblings, nieces, nephews or close friends within your Will. Specific bequests can ensure these individuals receive a portion of your estate, as they will not be automatically entitled to receive anything. Be clear and explicit in your Will to prevent any potential disputes.
• Pets: for many, pets are considered part of the family. Including provisions for the care of pets can ensure they are looked after following your passing.

When making these decisions, consider and specify how much each person should receive. This could be specific amounts, percentages of your estate, or particular assets. The potential tax implications of your bequests should also be considered, as certain inheritances can be more tax-efficient than others.

Clarity in your Will can prevent misunderstandings and disputes among those you leave behind. You need to be explicit about who receives what, and leave no room for interpretation. Ambiguities in Wills are often a leading cause of familial disputes, potentially leading to lengthy and costly legal battles that can erode your estate's value and tarnish your legacy.

Ultimately, clear and careful thought about who should inherit your estate, backed by legal advice, can provide peace of mind and security for both you and your intended beneficiaries.

How can I leave part of my estate to charity?

Leaving a part of your estate to charity is an ethical act, but can also be a practical component of estate planning, as it potentially offers tax benefits. Here's how you can ensure your philanthropic wishes are fulfilled.

• Identify the charity or charities: decide which charity or charities you wish to support. You might choose organisations that have personal significance to you, or those that align with causes you are passionate about. Ensure the charities are registered and reputable to guarantee your legacy is used as intended.
• Decide on the type of gift: you can leave specific amounts of money, particular items, or a percentage of your residual estate after other gifts and expenses have been deducted. Consider which form of legacy aligns best with your wishes and the needs of the charity.
• Understand the tax implications: gifts to charity are usually exempt from Inheritance Tax (IHT). Moreover, if you leave at least 10% of your net estate to charity, the IHT rate on the remainder of your estate may be reduced. Consulting with a solicitor can provide clarity on these benefits and help you understand how charitable giving can be part of tax-efficient estate planning.
• Consult with the charity: it can be beneficial to speak directly with your chosen charity about your intentions. Some charities have legacy departments that can provide guidance on how to word your bequest to ensure your wishes are correctly understood and followed.
• Properly document your wishes in your Will: ensure your intentions are clearly and accurately reflected in your Will. A vague or improperly worded bequest can lead to confusion or disputes, so you should always use the official registered name of the charity and its registered charity number to avoid any ambiguity. A solicitor can help you to ensure your Will is accurate and legally binding.
• Review regularly: charities can change in structure, merge, or, in rare cases, cease to operate. Regularly reviewing your Will and chosen charities ensures that your philanthropic goals are met and your legacy is preserved as intended.

Leaving part of your estate to charity is a powerful way to make a lasting impact. By carefully considering your options and seeking professional advice, you can ensure that your charitable bequest is a fitting tribute to your values and a meaningful part of your legacy.

Can my wishes still be disputed if I write a Will?

Writing a Will is undoubtedly the most effective way to ensure your wishes regarding your estate are known and respected. However, even with a Will in place, disputes can still arise for various reasons:

• Challenges on legal grounds: a Will can be contested on various legal grounds, such as lack of testamentary capacity (the mental capacity to understand and make a will), undue influence, or not adhering to legal formalities in drafting and witnessing the will. Ensuring your Will is professionally drafted and witnessed is critical to mitigating these risks.
• Claims under the Inheritance Act: the Inheritance (Provision for Family and Dependants) Act 1975 allows certain categories of people, such as spouses, children or dependants, to make a claim against the estate if they believe they have not been adequately provided for. While you have the freedom to distribute your assets, it is wise to consider potential claims and seek legal advice to address them in your Will.
• Ambiguities or errors in the will: ambiguities or errors can lead to disputes among beneficiaries. A clearly written, unambiguous Will, drafted with professional assistance, can significantly reduce the likelihood of misunderstandings.
• Changes in family circumstances: life changes, such as marriages, divorces, births or deaths, can lead to disputes if the Will is not updated to reflect these changes. Regularly reviewing and updating your Will is essential to ensure it continues to reflect your current wishes.
• Communication with beneficiaries: sometimes, disputes arise simply because beneficiaries are not aware of the reasons behind the decisions in a Will. Communicating your intentions to your loved ones, where possible, can help reduce the likelihood of disputes.

While it is impossible to guarantee that your Will won't be contested, taking these steps can significantly reduce the risk. Professional legal advice is invaluable in drafting a Will that is clear, legally sound, and reflective of your wishes. This provides the best defence against potential disputes.

How can I ensure my estate and wishes are properly protected?

Ensuring that your estate and final wishes are protected and respected will be much easier if you can take the following steps:

• Seek professional legal advice: consulting with a solicitor who specialises in Wills, trusts and probate is crucial. They can provide expert guidance on the complexities of estate planning, ensuring your Will is legally valid, clearly written, and free from ambiguities that could lead to disputes.
• Consider a trust: depending on your circumstances, setting up a trust can be an effective way to manage your assets, both during your lifetime and after your passing. Trusts can offer greater control over how your assets are distributed, provide protection against challenges, and be beneficial for tax planning.
• Regularly review and update your Will: life changes such as marriage, divorce, the birth of children, or the acquisition of significant assets can impact your estate planning. Regularly reviewing and updating your Will ensures that it accurately reflects your current situation and wishes.
• Be clear and specific: the more specific you are in your Will, the less room there is for interpretation or dispute. Clearly outline who your beneficiaries are, the assets you are leaving them, and any conditions or stipulations you wish to apply.
• Discuss your plans with your family: while not always easy, discussing your estate plans with your family can help prevent misunderstandings and disputes after you are gone. It provides an opportunity to explain your decisions and can help to manage expectations.
• Keep your documents safe: ensure your Will and any other important estate planning documents are stored safely. Inform your executor or a trusted person of their location. If you work with a solicitor to write your Wll, they may offer a safe storage service.
• Use letters of wishes: accompanying your Will with a Letter of Wishes can provide additional guidance and clarity. While not legally binding, they can express your thoughts on smaller personal items or explain the reasoning behind your decisions.

By taking these steps and working closely with legal experts like those at JMW, you can have peace of mind knowing that your estate is well-protected and your final wishes are clear, reducing the likelihood of disputes and ensuring your legacy is preserved as you intended.