News & Updates
The Importance of Estate Planning
Magnus Mackay, Partner at Wright, Johnston & Mackenzie LLP, believes the start of a new year is a good time to get your legal affairs in order, and is hoping to dispel some of the common misconceptions around Wills, Powers of Attorney, and planning for the future.
It can be difficult to think about making a Will. It is not the cheeriest of subjects, especially after Christmas when the long, dark days of winter loom large, but it is also the best way to ensure that what you want to happen after your death, does happen. It’s one of the most effective ways of protecting your loved ones in future, and nothing could be more important than that.
Many believe that simply being married is enough to protect your partner’s inheritance and that your assets will pass to them automatically on your death as a result. While this will be true for some people, for many others it will not be.
For those with larger, more complex estates, particularly those with multiple homes, farms or valuable business interests, the absence of a Will means the spouse only inherits so much before the remainder of the estate passes to children, or if there are no children, more distant relatives. These relatives could therefore end up inheriting a large part of the estate by default. If that’s not bad enough, an Inheritance Tax (IHT) liability could arise, which could have been avoided completely had there been a Will.
The situation is even more uncertain for unmarried couples. In the absence of a Will, a surviving partner is entitled to nothing on the death of their partner. A court may be asked to make an award to the surviving partner, but this would mean going through the cost and anxiety of a court action, when the solution could otherwise have been much more straightforward. This is why I would encourage couples to make sure each partner has a Will.
Wills are also essential for those in second marriages, or generally where there are children from a previous relationship to be protected. If a Will leaves everything outright to the second spouse, there is no guarantee that he or she will include all the children in their own Will. A carefully drafted Will can make it possible to ring-fence assets for those children.
Conversely, many people are unaware that where a person’s estate is subject to Scots law on their death, as will be the case for most people who die while resident in Scotland, biological and legally adopted children will have rights to a minimum share of their parent’s estate, regardless of the terms of a Will. This can be particularly relevant for business owners who have a clear plan for the individuals intended to take over the business in future. Where the claims are not desirable, action can be taken in lifetime to minimise the children’s claims, or deal with them in advance so they do not get in the way of the overall plan.
Another misconception surrounds Powers of Attorney. Many believe that marriage provides a couple with the legal authority to manage each other’s assets in the event of temporary or permanent incapacity, but this is not the case. A spouse has no technical authority, without a Power of Attorney or court order, to access a bank account in their partner’s sole name, should the account holder lose capacity. Similarly, if there is a desire to sell the house and one owner is incapable, if there is no Power of Attorney in place it might be necessary to go to court to ask for permission to sell the house. All of this can be avoided with a Power of Attorney.
Estate planning is first and foremost about providing peace of mind. Taking good advice means you can take comfort from the knowledge that your wishes will be followed to the closest extent possible when the time comes. That will let you focus on more enjoyable pursuits, like the new year health kick...
Wright, Johnston & Mackenzie LLP’s team of expert solicitors can advise on a range of personal legal matters including estate planning, inheritance tax, wills, powers of attorney, and trusts.
This article first appeared in The Scotsman
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at January 2022. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.