Making a Will: 6 Reasons Why It's an Evolving Strategy, Not a One-Time Fix

It’s your first meeting with a new client. You enquire about whether they have their estate plan in order. They proudly tell you how they drafted a Will and designated guardianship upon the birth of their first child – 20 years ago.

Case closed, onto the next topic….. not so fast!

Let’s explore the 6 key reasons why treating estate planning as a one-time task poses substantial risks and complications, which could have potentially devastating consequences for both your client and their family.

1. Beneficiaries are often temporary

Although your client may have chosen loved ones or organisations to receive benefits from their estate, life’s twists and turns often disrupt even the most carefully crafted plans. Let’s explore various situations that should prompt your client to revise the beneficiary details in their Will.

Changes in Relationships: Shifts in personal relationships, such as marriages, divorces, or the birth of children, may mean that your client needs to update their beneficiaries or to put in structures such as trusts to protect the interests of a class of beneficiaries (eg allowing a new spouse to reside in their property until their passing but then it pass onto their children from a previous marriage instead of onto the partners children via their Will.)

Clients should be particularly alerted about the status of their Will if they marry or divorce – many will be unaware that marriage will revoke a Will unless special provisions are included in it, and that divorce will not exclude a former spouse until the decree absolute is issued. 

Family Dynamics: Estrangements or reconciliations within the family may influence who someone wishes to include or exclude from their Will, and special advice must be given to reduce the possibility of claims against the estate by disgruntled relatives in these circumstances.

Financial Circumstances: Changes in financial status, such as increased wealth, may prompt a reassessment of how assets are distributed among beneficiaries, for example, a Will may need to be changed to give a lesser share of the estate to a child who has been financially supported in establishing a business so that the relative shares received by all children are equal. Alternatively, a testator’s asset profile may have changed substantially so that the gifts bequeathed in a Will may, owing to a diminution of circumstances, no longer exist.

Health Issues: Concerns about the health or financial stability of beneficiaries may lead individuals to alter their estate plans accordingly. If a beneficiary becomes vulnerable your client may wish to set up a trust to help manage and distribute assets for the benefit of the vulnerable beneficiary, thereby taking advantage of the beneficial tax treatment that may be afforded to such trusts. A trustee would be appointed to oversee the trust and make decisions in the beneficiary’s best interests.

Death of a Beneficiary: If a named beneficiary predeceases your client, they may need to update their Will to designate an alternate beneficiary to avoid the potential of a partial intestacy whereby the property in question would be inherited according to a legally mandated hierarchy of beneficiaries, and not necessarily where your client would wish.

Changes in Asset Ownership: Acquiring new assets or disposing of existing ones may trigger adjustments to ensure fair distribution among beneficiaries.

Desire to Include New Beneficiaries: Over time your client may want to include new family members, friends, or charitable organisations as beneficiaries in their Will. They should ensure that every time their family grows (with the addition of a new child or grandchild) that the relative distribution of assets correctly takes into account the needs of their family holistically, with appropriate trust structures in place to ensure that young beneficiaries do not inherit before they have sufficient maturity to manage their own finances responsibility. 

In essence, any significant life event or change in circumstances that affect an individual’s wishes for the distribution of their assets should prompt them to update their Will and beneficiaries accordingly.  It is the role of the professional adviser to make sure that their clients are aware of any triggers which should prompt a reconsideration of their testamentary plans.

 2. Executors need careful and regular consideration

An Executor is an individual appointed by the maker of a Will (the testator) to carry out the instructions and wishes outlined in the Will after the testator’s death. The executor is responsible for managing the deceased person’s estate, including settling debts and taxes, and handling any legal proceedings related to the estate, and (if they are also appointed as trustee, as is usually the case,) for distributing assets to beneficiaries.

Here are some reasons why your client may need to review and update their chosen executor. 

Relationship Changes: If the relationship between the testator and the chosen executor deteriorates or changes significantly, the testator may wish to appoint someone else whom they trust more or who is better suited for the role. 

Geographical Convenience: The original executor may have moved away or become otherwise unavailable, making it impractical for them to fulfill the duties of executorship. In such cases, the testator might appoint someone closer or more accessible. 

Death or Incapacity: If the originally appointed executor passes away or becomes incapacitated before the testator, it becomes necessary to designate a new executor to carry out the instructions in the Will. Also, if the initial choice of executor is older than the testator, it may be prudent to appoint a younger person who is more likely to survive the testator and be able to perform the office. 

Changing Circumstances: Changes in the testator’s circumstances, such as changes in health, financial status, or family dynamics, might require your client to re-evaluate who is best suited to serve as executor. 

Professional Executor: Sometimes, the complexity of the estate or the desire for impartiality may lead your client to appoint a professional executor, such as a lawyer or a trust company, instead of a family member or friend. 

Trust Issues: If the testator loses trust in the executor’s ability to carry out their wishes faithfully or suspects misconduct, they may opt to replace them with someone they believe will act in the best interests of the estate and beneficiaries. 

It’s best practice for your client to regularly review their chosen executors to ensure their suitability, trustworthiness, and ability to carry out the responsibilities effectively.

3. Moving abroad

If your client moves abroad, the laws governing their Will may change depending on their new country of residence. Here’s what typically happens to a Will when someone moves abroad:

Validity: The validity of a Will may vary depending on the laws of the new country of residence. Some countries recognise Wills made in other jurisdictions, while others require that Wills be executed according to their own legal requirements. Your client must seek to understand the laws within their new country of residence. 

Local Laws: If a client’s Will is not recognised in their new country of residence or if local laws differ significantly from those in their home country, they may need to create a new Will that complies with the legal requirements of their new jurisdiction. This may involve drafting a new Will or making amendments to their existing Will to ensure it aligns with local laws. 

Translation: If your client’s Will is in a language that is not widely spoken in their new country of residence, it may need to be translated into the local language to be legally recognised. 

Overall, moving abroad may require your client to review and potentially update their estate planning documents to ensure they are valid and enforceable in their new country of residence. It’s essential to seek professional advice to navigate any legal complexities and ensure your wishes are properly documented and executed. 

Even purchasing property abroad should prompt a review of the Will(s) in place for your client as there can be complex tax implications if overseas property is purported to pass under an English Will and an overseas Will. 

4. Owning a business

If your client starts their own business, there are several important factors to consider to ensure that their business interests are adequately addressed and smoothly transitioned in the event of their passing. Here are some key points to consider: 

Succession Planning/ Business continuity plan: They should determine who will take over ownership and management of the business after their passing. This may involve naming a specific individual (such as a family member or business partner) to inherit or buy the business, or outlining a process for selecting a successor. It’s good practice to outline a plan for the ongoing operation of the business in the event of their passing. This may include appointing an interim manager or executor to oversee business operations during the transition period and consideration of a new hierarchy.

Business Valuation: Obtaining a current valuation of their business will enable them to determine its worth. This will help ensure that the value of the business is fairly distributed among beneficiaries or accurately reflected in any buyout arrangements. 

Specialised Trusts or Provisions to ensure maximum Inheritance Tax Relief: They should consider using specialised trusts or provisions in their Will to transfer ownership of the business, such as a buy-sell agreement, a trust holding company shares, or a testamentary trust that holds and manages business assets for the benefit of specific beneficiaries. This can often give rise to significant Business/Agricultural Property tax relief which can ensure that the maximum available amount can pass to the chosen beneficiaries. 

Debts and Obligations: Their Will should specify how any outstanding debts or financial obligations are settled or whether they should be deducted from the value of their estate or the proceeds from the business sale. 

Regular Review and Updates: Client’s should regularly review and update their Will to reflect changes in their business, such as growth, expansion, changes in ownership structure, or new partnerships. This will help ensure that their estate plan remains current and effective in achieving their goals. 

By carefully considering these factors and working with legal and financial professionals experienced in estate planning for business owners, your clients can create a comprehensive Will that protects their business interests and facilitates a smooth transition of their business upon their passing.

5. Inheriting or acquiring money and property

Your client should review their estate plan upon acquiring or inheriting a significant amount of money or any other valuable assets. Here are a few reasons why updating their Will after a significant change to their financial position is important: 

Reassessment of Estate: Inheriting or acquiring money can significantly change the value of their estate. It’s essential to reassess their overall financial situation and determine how the increase in wealth affects their assets and liabilities. 

Changes in Beneficiaries: They may want to reconsider beneficiaries or adjust their inheritances in light of their new wealth. This could involve adding new beneficiaries, increasing or decreasing inheritances, or removing beneficiaries altogether. 

Tax Implications: Inheritances can have tax implications, depending on the amount and the laws of your jurisdiction. Updating their Will can help ensure that your client’s estate plan remains tax-efficient and minimises tax liabilities for their beneficiaries. 

Estate Planning Strategies: Inheriting or acquiring money may present opportunities to implement new estate planning strategies, such as setting up trusts, gifting assets, or making charitable donations.

Updating their Will allows them to incorporate these strategies and maximise the benefits for themselves and their beneficiaries. You may also wish to advise your client to disclaim any inheritance in favour of their children if such inheritance is not needed, thereby avoiding the double taxation of the asset as it passes between generations. This would be as part of a wider intergenerational plan which would include reviewing their Will.

Overall, inheriting or acquiring a significant amount of money is a significant life event that may warrant updates to an estate plan. To avoid complications and potential conflicts your client’s estate plan must reflect their current financial situation and objectives.

6. Changes to physical or mental health

Health can take a sudden and unexpected turn, especially with diagnosis of progressive or terminal illnesses such as cancer or Alzheimer’s. These stark reminders highlight the importance of staying proactive in updating one’s estate plan, particularly when faced with a terminal diagnosis. 

For clients confronting terminal illnesses, several crucial considerations come into play when revising their estate plan.

It’s crucial for clients to collaborate with a solicitor to establish advance health care directives and appoint a lasting power of attorney for health and welfare and property and financial affairs if they haven’t already done so. These cannot be established after the loss of capacity and failure to make advance arrangements could result in decisions in relation to your client’s wellbeing falling to the local authority. 

In cases of a dementia diagnosis, proving mental capacity may be necessary before making changes to Wills or other estate planning documents. 

Empowering Financial Advisers: Help your client’s protect their loved ones and their wishes

Change is inevitable, your client must ensure their estate plan reflects their latest position and wishes to protect themselves and their loved ones for the future.

Estgro can support your clients as changes happen, assessing their current position and making personalised recommendations for ways in which they should update their estate plan or related documentation.  

We strongly advise Financial Advisers to educate both new and existing clients about the significance of maintaining an up-to-date estate plan. It’s not only essential for their own financial security but is best practice and forms a key part of your Consumer Duty obligations to offer holistic financial advice. It can also be a great reason for a regular check-in.

What’s more, offering estate planning can be an effective way to ensure you safeguard your portfolio and form wider family relationships to protect your business from the risks posed by the Great Wealth Transfer.

No matter how you currently handle estate planning conversations Estgro can improve and digitise the process for you. Please get in touch for more information.