Skip to main content

Why is it important to make a Will?

Making a Will is the best way to give you peace of mind about what happens after you’re gone. It makes sure that the people you want to benefit receive what you want them to. It can save your loved ones a lot of stress as well as legal paperwork, and potentially an inheritance tax bill. You might think you don’t need a Will if you’re married or don’t have a lot of money, but making a Will is the only way to be certain about what happens to your estate. Without a Will, the rules of intestacy apply, and you lose control of what happens to your assets.

What is intestacy?

The rules of intestacy are set by the government and dictate what happens if you haven't left a Will. If there isn't a surviving spouse, your estate will trickle through your family members. Initially it would go to children, and if there are no children, it goes back to your parents. If there are no parents, it goes to siblings, half siblings, grandparents, uncles, and aunts. And then right at the end of the list is the government. Making a Will is particularly important if you want to control where your assets may end up.

Even if you think you don’t really have anything of value or have anyone specific you want to leave your assets to, it depends how you feel about distant family members or the government potentially ending up with your estate. You might prefer it to go to charity or friends, for example. A Will lets you control that.

What about cohabiting partners?

It's really important to note that if you are co-habiting or have a partner but are not married, your partner/cohabitee has no entitlement at all to your estate. Even if you’ve been together or lived with one another for years, your cohabitee/partner will not benefit without a Will saying otherwise. Unless you co-own the property as ‘Joint Tenants’, where the property would automatically pass to the surviving owner, if something happens to you, your partner may have no right to stay in your shared home. The property, or your share of the property, would pass to your next of kin.

What about my pension?

Some assets pass outside of the control of a Will, such as pensions, death in service benefits, and any life insurance policies, provided you have stated who you wish to be a beneficiary by an Expression of Wish. To make sure these things go to the right person, make sure you keep your expression updated. These assets also pass outside of your estate when inheritance tax is calculated.

Will I pay inheritance tax?

Lots of people are concerned about inheritance tax and how much their loved ones may have to pay. Every individual has an inheritance tax allowance – a nil rate band of £325,000. So that's an amount that you can leave before any inheritance tax kicks in. Everything over that £325,000 will be taxed at 40%. However, there are some exceptions and allowances, which can increase how much you can leave tax free.

What are the exceptions?

A few years ago, the government introduced what's known as the ‘residence nil rate band’. This is an extra allowance of up to £175,000 per person, which applies to a property you own that you are passing to your direct descendants (children, grandchildren, stepchildren etc). If this applies, you can combine both the nil rate band and the residence nil rate band, to have a maximum of £500,000 before inheritance tax applies. The availability of this relief tapers away if your estate is over £2 million.

There is also a spousal exemption, so anything that you leave to your spouse is tax exempt. When your spouse passes away, they would claim their allowance of up to £500,000 and would also be able to claim your unused allowance as well. So, as a married couple with children, you should have up to a million pounds that you can leave tax free. Above that point, it will be taxed at 40%.

How do gifts to charity impact inheritance tax?

Your Will is an opportunity to think about who else outside of family and friends you might want to benefit from your estate. There are some big tax advantages to leaving money to a charity as this would be exempt from inheritance tax. And if you leave at least 10% of the base value of your estate to charity, the remainder would be taxed at a reduced rate – instead of the standard 40% inheritance tax, the rate would decrease to 36%. You can leave money to any charity, big or small, including Cardiff University. Many alumni and supporters leave gifts in their Wills to Cardiff University towards research into cancer or neurological conditions, or scholarships for students. It’s a wonderful way to make a gift for the future that is tax efficient, and can ultimately leave a little more for your loved ones.

What are trusts?

A trust is essentially a way of making a gift with strings attached. It allows you to have some control and flexibility as to how your beneficiaries are provided for, and gives them access to benefit from the assets that are held in the trust – but without it actually falling under their control.

There are a number of different types of trust. A discretionary trust is a very common trust used, which can ring-fence all or a share of the estate. The trust might contain a share of a property, cash, or investments, and the trust can protect it from the circumstances of the beneficiary. You pick trustees who have wide discretionary powers to manage the trust for the beneficiary. For example, a discretionary trust can be used to keep funds aside for beneficiaries until they reach a certain age, or to spread gifts out so they don’t receive everything in one go. They offer a lot of flexibility, so if your wishes are quite complicated, it can be easier than trying to capture everything in a Will. A discretionary trust is also a good way to provide for beneficiaries who are vulnerable or disabled.

The key thing to consider with a discretionary trust is that you have to prepare letter of wishes to sit alongside your Will. This gives the trustees information and guidance as to how you want your assets to be used and who you want to benefit. The letter of wishes is not legally binding, so it's really important that you pick trustees that you can rely on to act in line with your wishes.

Another commonly used trust is a life interest trust, which is useful to give someone the benefit of an asset for their lifetime, but retains control of where it passes after their death. For example, a married couple may leave everything to one another, but a life interest trust could protect a part of the estate so that if one passes away and the other remarries, an element is kept in trust for any children or other beneficiaries. It’s particularly useful for those in second marriages, as a way to provide both for a new spouse and children from a previous relationship.

Laura Ikin (LLB 2006, PgDip 2007)

More from Cardiff Connect magazine

Cardiff Connect 2024

In this Summer 2024 edition of your alumni and friends magazine, you’ll hear how our talented alumni are supporting the next generation of students and making a difference to the world around them. Learn how our researchers are advancing our understanding of tuberculosis and using cutting-edge technology to improve global women's health.

Helping postgraduate students to prosper

Mushtaq Karimjee (BSc 1971) founded the Fanaka Scholarship which supports students from his home country of Tanzania to complete a postgraduate degree at Cardiff University.

Giving future archaeology students the best opportunities

Julia Wise (BA 1986) is helping to ensure the next generation of archaeologists can study at Cardiff, free from the pressure of financial worries.

Welsh surgeon’s legacy lives on, empowering the next generation of Cardiff medical students

Dr John Thomas' passion for medicine and making education accessible inspired his family to establish the Dr John Thomas Bursary.