Making a will and planning what to leave

When making your will, how much do you have to leave? Who gets what? Here’s how to work out the basics so you can start getting serious about writing your will.

Making your will – step by step

Before you can write a will you need to decide who gets what. You should set down the basics of your plan for your money and possessions – your estate – early on, before you visit a solicitor or discuss your will with your family.

Don’t worry, it’s easier than it sounds – just follow this step-by-step process.

1. Make a list of who you want to benefit from your estate

It’ll probably take you just a few minutes to tick off this step – you can even do it right now. You might include:

  • your partner or spouse
  • children and other family members
  • friends
  • charities

These people (or charities) are called your beneficiaries.

2. Write down your assets and roughly what they’re worth

Start with assets that are easiest to value:

  • savings
  • valuable objects, like jewellery or heirlooms

Then move on to the things that change in value. These will be harder to estimate exactly. They include:

  • property – your house, plus any investment properties, land, or even a car parking space that you own
  • stock market investments – shares, bonds, funds
  • your business, if you own or part-own one
  • your pension

Lastly, think about any sentimental items that you want particular people to have.

Whether you can include your pension will depend on the rules of your pension itself and you will need to check. If you can include your pension, estimating its value might take some thought.

The value will depend on your scheme and when you die. Your first stop should be to read the death benefits adviceopens in new window from the Pensions Advisory Service.

3. Think about how you want to split your money and property when making your will

There are broadly five types of legacy you can leave.

  • I leave £2,000 to my son” – this is called a ‘pecuniary bequest’. It means you leave a fixed sum of money.
  • I leave my jewellery to my daughter” – this is called a ‘specific bequest’. It means you leave a specific item which you own. The way to identify it will be to see what meets that description at the date of death. If there is no jewellery at that time, then the gift will fail.
  • I leave half my estate to my brother” – this is a ‘residuary bequest’. It means you leave a percentage of whatever your estate is worth after any debts, costs, liabilities, legacies and tax have been paid.
  • I leave my share of my house to my wife if she survives me, but if she does not survive me then it will pass to my daughter” – this is a ‘reversionary bequest’ for your daughter. You can specify what happens if the person you leave it to dies.
  • I leave my share of my house to my wife for the rest of her life, and then it will pass to my daughter” – this creates a ‘trust’ over your share of the house. A trust allows you to say who you would like to benefit from your property immediately after your death (e.g. your wife), and then who you would like to benefit from your property (e.g. your daughter) once the first person you have chosen to benefit immediately after your death has died. This type of gift can easily go wrong, so you will need to get legal advice if you want to include a ‘trust’ in your will.

If your affairs are comparatively simple (for example, you want to leave everything to your husband), it’s likely you’ll just use simple residuary bequests. If things are more complicated, you’ll probably use a combination. For example:

Mike is married with one son. His wife has a son too, from a previous marriage. He leaves:

  • his share of his home to his wife for the rest of her life passing to his son on her death
  • £1,000 to each of his grandchildren
  • his watch to his wife’s son
  • anything else in his estate to a charity

June is divorced with three children and four grandchildren. Her son has mental health problems. She leaves:

  • £500 to each grandchild
  • half the remaining estate in a trust for her son for the rest of his life, to be split between her daughters on his death, and
  • a quarter of the estate each to her daughters, but if any daughter dies before her, that daughter’s children will receive the dead daughter’s quarter share of the estate between them

4. Check if you’ll have to pay Inheritance Tax

The Inheritance Tax threshold is currently £325,000 for an individual or up to £650,000 for a married couple or a couple in a civil partnership. If your estate is worth more than this when you die, Inheritance Tax (currently 40%), will have to be paid on the excess. The Inheritance Tax threshold can be reduced or eliminated by certain gifts made in the seven years before death.

From 6 April 2017, a new tax free allowance of £100,000 (rising to £175,000 by 2020/21) will give each individual an additional allowance to be used against their home, provided they leave it to their children or grandchildren. The allowance can be transferred to a spouse or civil partner if it isn’t used up on the first death.

This means when added to the existing £325,000 individual allowance, a couple will be able to leave £1 million without paying inheritance tax by 2020.

The rules aren’t straightforward. If you think you’re near the limit you need to get more information on how to legally avoid it or minimise the amount – which could save thousands of pounds. You’ll probably want to get professional advice to help with this.

5. Think about protecting your beneficiaries

Sometimes you might want to set some safeguards on your bequest – for example, if you’re leaving something to a child or someone with disabilities or mental health issues.

Many people handle these issues by setting up trusts: this means that what you leave can be managed by people you trust to act in the best interests of your beneficiary, either for good or until a time when they can look after themselves.

What to do once you’ve made your will

Once you’ve worked through the steps you’ll have a reasonably clear idea about what you want to leave in your will and to whom. You may want to talk to your family about your choices.

Your next step is to get your will drawn up. If your estate is quite simple (eg you’re simply leaving everything to your partner), you can probably do it yourself. The more complex (and larger) your financial affairs, the more sensible it is to take advice from a solicitor.

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