Taking instructions for a will involves more than simply recording a client’s wishes. It requires a thorough review of the client’s circumstances and identifying any documents that may potentially disrupt the client’s wishes. A will is only as effective as the information that informs it, and overlooking a key document could unravel even the most carefully drafted will.
This is our series outlining the essential estate planning documents that should be reviewed when taking instructions for a will. Whilst the range of documents outlined in this series may seem extensive, it is important to remember that not all will be relevant in every case.
Following on from our first article, this second instalment will deal with documents relating to finances and property of the client.
Land Registry Titles
Land Registry entries provide definitive evidence of legal title to a property. In the majority of cases, the equitable ownership will be the same. Viewing the Land Registry title will therefore confirm whether the client owns property solely or jointly, and if jointly, whether as joint tenants or tenants in common. This ensures that the will accurately reflects the client’s actual interest in the property.
Reviewing the title will also identify any restrictions, which may flag need to investigate further.
Example:
A client may believe they own a property outright, but the Land Registry title reveals a Form A restriction, suggesting the existence of other equitable interests.
Upon investigation, the client is a widow, the property was previously held as tenants in common with the late spouse, and the late spouse’s will created a will trust. The will can now be drafted in the knowledge that the client is only a part owner, and not the sole owner, of the equity.
Declarations of Trust Relating to Property
A declaration of trust sets out the beneficial ownership of property, which may differ from the legal title. If a declaration of trust exists, it should be reviewed to confirm the beneficial ownership. It may be a simple document only detailing the equitable ownership, or alternatively there may be further restrictions that could impact the will planning.
Example:
A declaration of trust includes provisions granting a co-owner the option to purchase a deceased owner’s share in the property.
Trust Deeds in Which the Client Has an Interest
Clients may be beneficiaries, trustees, or settlors of existing trusts. Reviewing such trusts is advisable for several reasons:
- Certain interests in a trust may be giftable by will.
- Some trust interests may form part of the client’s estate for inheritance tax purposes.
- Where the client has created trusts themselves, this may impact the availability of the nil rate band against the death estate, particularly if there is a gift with reservation or if the trust was created within seven years of death.
Example:
A client may be a remainder beneficiary of a life interest or interest in possession trust with a vested interest. That interest is giftable in their will.
Expressions of Wishes Relating to Pensions
Pension benefits usually fall outside the estate and are distributed at the discretion of the pension scheme trustees. However, clients can complete an “expression of wishes” form to indicate their preferred beneficiaries.
Clients may be undertaking large-scale succession planning via their pensions. Knowledge of this may impact the advice given around the will. For example, a client may be leaving children lesser provision via the will, knowing that they have been provided for via pensions.
Currently, pension benefits fall outside the estate for inheritance tax purposes, however this is set to change from April 2027. Knowledge of the beneficiaries of pensions will therefore become increasingly relevant.
Life Insurance Policies and Death-in-Service Benefits
Life insurance policies and death-in-service benefits can form a significant part of a client’s wealth.
It is important to determine whether these policies are written in trust, as this will mean the proceeds fall outside the estate and are not capable of disposition by will.
Policies in trust will also be outside of the estate for inheritance tax purposes, although there can be risks if these pay out to a spouse outright, as they then could be taxed as part of the surviving spouse’s estate on their death.
Where policies are held in trust, it should be confirmed who the nominated beneficiaries are, and whether these are consistent with the client’s current wishes. Similar to pensions, a client may be undertaking large-scale succession planning with these policies.
Loan Agreements
Clients may have made loans to family members, friends, or others, or may themselves owe money.
It should be confirmed whether any written loan agreements exist in respect of these loans. In the absence of a written loan agreement, there may be disputes regarding the enforceability of the loan, particularly for a loan between family members.
If a client has made loans, the outstanding amount may be disposed of by will, either specifically or as part of the residue. Alternatively, the loan may be forgiven or deducted from the borrower’s inheritance. If the client owes money, these debts would need to be repaid as part of the administration of their estate.
Example:
A client may have lent a substantial sum to a child with the understanding that it would be deducted from their inheritance. Reviewing the loan agreement ensures the loan has been properly documented and that the client’s wishes can be reflected in the will.
Conclusion
Financial and property-related documents can significantly affect the structure and tax implications of an estate. Reviewing these essential estate planning documents ensures that the will reflects the client’s true asset base and supports their broader intentions.
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