With potential inheritance tax changes on the horizon, it’s never been more important to get will writing right. Doug Hargrove, of Law Society partner, the National Wills Register, explains
There has been plenty of speculation around the possibility that the government may reform aspects of inheritance tax, as it looks to generate an additional £8.5bn per year by the end of this parliament (no later than 2029), without increasing the burden on individuals by increasing income tax or National Insurance.
This has centred around speculation that we could see certain reliefs removed; the main threshold capped to £500,000; rules created to limit the effectiveness of trusts; or simply an increase to the rate of inheritance tax paid.
Many are waiting on the first hints of what is to come. With the possibility of first consultations as soon as this autumn, it might not be long to wait. However, this will have wide-ranging effects, not only on estate planning but also on will writing and the potential for an increase in the number of disputed wills.
In this article we will review some of the potential changes, the impact they will have on testators and beneficiaries, and the increased importance on having a robust and well-written will.
Impact for testators and beneficiaries
It’s no surprise that contested wills are in a steady climb. With one in three people relying on an inheritance to be able to retire or pay off debts, 75% of people in the UK are likely to experience at least one contested will dispute in their lifetime, according to IBB Law’s UK Inheritance Disputes Report 2022.
If the government does decide to look at inheritance tax reform, this could squeeze the net value of estates available to beneficiaries. This, along with the rise in contested wills, could add fuel to the fire, should disgruntled parties feel they have not had their fair share in the will. Targeting reliefs could force people to consider inheritance tax planning much sooner and look to outline their intentions formally in a will.
These changes could also cause further complications when it comes to gifting, for example, should someone who has gifted shares in a business pass within seven years of that gift, then tax would still apply. This could in turn create additional choices for families – including selling off shares. There could then be additional contention as to whether a sale should be considered cash within the inheritance and applied in line with the rules of testacy, versus the original gifting of the shares in the spirit they were gifted.
The importance of will writing best practice
Considering all that, it’s no surprise that the need for a will that is clear in its instruction is essential.
There are a few ways that as a legal professional you can help support your clients in this:
- Ensure that provisions are made for all eventualities, especially if the estate is complex and has the potential to be caught up in new provisions. Communicating all eventualities and the risks to the beneficiaries involved with your clients ensures that testators can consider every outcome, meaning they are more likely to find an outcome that they are happy with.
- Undertake proper safeguarding protocols to ensure that the testator is protected, and the will is valid. This includes reviewing mental capacity and keeping an eye out for any signs of coercion.
- Register the will with the National Will Register. Registering the will ensures that it can be found and wishes can be known at the time the will is needed. This can often be overlooked, but is more important than many expect – 72% of UK adults stated to us that they wouldn’t know where to find their parents’ will. Through a Certainty Will Search, executors and beneficiaries can search through 10.5 million wills for the location of a registered will as well as geographically targeted searches of unregistered wills. This secure and confidential service reduces the chance of a will being challenged by helping to validate which will is the last will. As of writing, one in five found wills impact estate administration which highlights the importance of registering the will.
With the prospect of significant changes to inheritance tax on the horizon, the importance of thorough and proactive will writing cannot be overstated. Legal professionals play a pivotal role in supporting their clients in this. Adopting robust will writing practices now will ensure that clients’ wishes are respected, and their estates are protected, regardless of future legislative changes.
