Caught in the trap

Few of us would choose to spend money on legal fees if we did not have to and, in these straitened financial times, never has this been more the case. In this age of corner cutting, will writing appears to be one of the legal fields most commonly perceived ?as an area where savings can be made ?by ‘doing it yourself’.

So what can possibly go wrong with writing down who should have what when you die? And when death occurs, what is so difficult about those you choose marshalling your assets, getting probate and distributing your estate according to your will? Surely it’s just the lawyers mystifying the subject and making it seem harder and therefore more expensive than it really is?

Relatively speaking

Not so. While it is true that, if such matters are approached properly and with some research, costs can sometimes be saved, if things go wrong, not only are there no savings, but significant extra cost may have to be incurred by calling in the lawyers to sort things out. It is usually the relatives who discover, on their loved one’s death, that the DIY will has created a minefield, which can only be negotiated at far greater legal expense than if the will had been professionally drafted in the first place. That is, provided said loved ones do not decide to obtain probate and administer the estate without legal assistance too, which also seems to be increasingly the case.

The most common approach to DIY wills and probate is by means of either will packs or will-writing companies. ?Will packs can be bought in many high street stationers and online. One only ?has to glance at them to see how confusing they can be, providing a range of options which could be challenging, even for the most experienced lawyers. Small wonder therefore that problems can and do occur.

Will-writing companies come with their own problems. It is unlikely that such establishments will be staffed by qualified lawyers, offering as they do, to draft wills at a fraction of the cost that solicitors charge. The wills produced often demonstrate no more knowledge or understanding of the subject than the average DIY will. The average cost for a solicitor-drawn will tends to be a few hundred pounds, which does not seem unreasonable when one considers what a will is designed to achieve. In that context therefore, a fee of between £10 and £20 in some cases seems derisory, and almost doomed to be a false economy. Never have the words ‘you ?get what you pay for’ been more true.

Wrong turn

There are some key areas where things can and frequently do go awry.

Signing the will. Many DIY testators either fail to sign their will at all, or fail to sign it in the right place. More often still, they have not had their signature properly witnessed by two independent witnesses present at the same time as the testator and as each other. If the will does not fulfil those necessary legal requirements, it may fail in whole, or in part, and the testator could die intestate so that their estate may not go to those of their choice. It is also likely to be more costly to administer, thereby reducing what the beneficiaries will actually receive (see case study one).

Executors. One of the main reasons for making a will, apart from disposing of your property as you wish, is to ensure that your estate is administered by persons of your choice, who are likely to be alive at your death. Therefore, it is prudent to appoint younger adult members of your family or friends, provided you trust them and they are capable of handling your affairs. In some cases it may be appropriate to appoint ?a professional, i.e. a solicitor.

DIY wills often either fail to appoint executors completely, or appoint people who are too old, incapable, or unsuitable. Failure to appoint executors at all does not invalidate the will, but means that the persons who will be qualified to act as personal representatives will be those who would administer your estate on intestacy. They may not be the people you would have otherwise chosen. Inappropriate choices of executors can also lead to problems, including family disagreements, in administering the estate. Extra legal ?costs will almost inevitably be incurred ?in sorting out the problems.

Alterations. If a mistake is made in drafting a will or codicil, it can only be altered by crossing it out, if noticed at the time of signing, and the alteration must be initialled by the testator and the witnesses all present at the same time. If a mistake is noticed after the will has been executed, or there is a need to alter a provision of the will subsequently, ?it cannot be changed except by making ?a new will or a codicil.

Otherwise the will stands, but without the alterations, unless the witnesses to the will swear an affidavit ?to the effect that the alterations were made by the testator in their presence. Once again, avoidable legal expense will be involved in rectifying the situation ?at a cost to the ultimate beneficiaries.

Making effective gifts. Simple as it may seem, many people have no idea what they actually own, in what capacity, and therefore do not know what they have to give away. This often translates into a confused DIY will. A common problem arises regarding joint ownership of houses or land, where the terms ‘joint tenants’ and ‘tenants in common’ are frequently misunderstood (see case ?study two).

Spelling it out

Beneficiaries. DIY wills often fail to identify correctly those who are to benefit under the will, what or how much they are to receive, or indeed fail to provide for them at all. For instance, incorrectly naming a charity could lead to an undignified and costly dispute in court as to which charity was intended, resulting in loss to the estate and to ?the charities involved. In other cases, ?it is easy enough to give away a sum ?of money, but sometimes the testator ?has not considered whether there will ?be enough left to go round, and when he or she dies the legacies may have ?to be reduced proportionately in order that the beneficiaries can receive anything at all.

Gifts to minors also give rise to rich rewards for those required to unravel the complexities of inadequate trust provisions inadvertently created by ?DIY testators, who have not thought through when or how their children should have access to their estate (see case study three).

Tax. With the introduction of the transferable nil-rate band, inheritance tax planning in wills has become simpler, at least where husbands and wives or civil partners are concerned. There is ?no longer a need to include complicated trust provisions to ensure that the nil-rate band of the first partner to die is not wasted. However, sometimes such trusts are still needed, for example where there is a need to save on care fees or to avoid the possibility of family disputes, and a life interest trust may be more appropriate to preserve the family home for the children of a first marriage, where a surviving spouse has married again and wants the second spouse ?to be able to remain in the home until they die. Incorporating such structures in a will, or indeed dismantling them where no longer necessary on a person’s death, is not a straightforward matter, and incurring the cost of professional guidance at the outset is definitely to ?be preferred to the possibility discovering those plans have failed when the person has died and it is then too late to do anything about it.

By the same token, personal representatives have often been known to subject estates to capital gains tax liability which, with the benefit of expert advice, they could have avoided by transferring assets to the beneficiaries before sale to increase the personal exemptions available to set against ?a resulting gain.

Equally, DIY ‘probateers’ are often unaware of the advantages of varying a will to enhance a beneficiary’s own personal inheritance tax position. Yet a solicitor can prepare a deed of variation for a beneficiary, redirecting gifts under a will, at very low cost, compared to the tax saving that may be achieved for the beneficiary in relation to their own estate when they die.

Reasonable demands

Obtaining probate and administering an estate. Even if there is a valid will that meets all the necessary legal requirements, the number of people who do not understand what ‘probate’ means or what obtaining it involves is surprising. It would be a mistake for lawyers to suggest that it is something that cannot be done except with their advice, especially as the Probate Service specifically provides a procedure for personal applications to be made. So, ?if, on the face of it, the situation looks ?as if it is going to be very traightforward, it is not unreasonable for them to encourage personal representatives ?to ‘do it themselves’, offering supportive general guidance when needed, or if things start to go wrong, but such cases are not that common.

More usually, just understanding, for example, how to make a claim to transfer the nil-rate band, can be demanding, and if the estate is a taxable one, requiring completion of a full IHT 400, it is a brave layman who takes on this detailed and voluminous form, without committing extensive research and time to complete it to the satisfaction of the Inland Revenue. That is before sufficient funds have been raised to meet the inheritance tax which has to be paid before a grant of probate can be issued, which in itself can be a problem. Even then, the revenue is only interested to see that the correct amount of tax has been paid, rather than to point out a glaring omission which might have resulted in ?a saving in tax. To establish this and iron out all the other unforeseen wrinkles that can arise, one really does need guidance from a lawyer.

Once the grant has been issued, one might think that it ought to be easy to collect in the assets, sort out the remaining tax, debts and expenses, pay the legacies and distribute the residue according to the will. That is not always the case, as many have discovered to their cost, when confronted by such problems, as, for example, unpaid creditors, disgruntled and impatient beneficiaries or dependant relatives making a claim against the estate. ?That often seems to be the moment these days when frustrated executors ?will admit defeat and call in the lawyers to untangle what would have been rather less of a mess, had they been instructed at the outset.

So, is it really just solicitors who are trying to pull the wool over the public’s eyes by pretending wills and probate are ‘rocket science’, the mysteries of which can only be explored and unravelled with their help and expertise? I believe the legal profession would enhance their reputation if they sometimes did not lead people to believe that there is nothing that can be done in this arena, however simple, without legal advice. Let us not forget that this was once the minor province of Uriah Heap-type probate clerks scratching away in a back room with a quill pen, and not one for the ‘real’ lawyers.

However, wills and probate have now become significant and skilled areas of law, often involving complex legal issues. We must also remember that, with property prices as they are (even in today’s depressed market) there are few of us that do not have a reasonable estate to leave which, if not disposed of and administered properly, stands to be substantially reduced as a result of cutting corners by ‘doing it yourself’. n

 

Sue Smith is a senior associate at Thomson Snell and Passmore