What should I not include in my Will?
What can I put in my Will? Can I distribute all my property in my Will? Are there certain assets or property I should never include in my Will?
This article outlines property and assets you may own but which you cannot pass in your Will.
Whilst it is true that you have unrestricted freedom to make gifts in your Will to whom you please, in practice there are some restrictions or caveats.
One such example is the fact that those you wish to exclude or disinherit may still be able to claim some inheritance.
You can read more about how to exclude someone from your Will here.
Another practical restriction when writing your Will is the fact that some of the property you own are bound by their own rules and so will pass independently of the terms of your Will.
The easiest way to understand these is by dividing them into the following categories:
• Property you own but which do not pass to your personal representatives
• Property you do not own but with which you have a connection.
Property in the first section may still be taxable as part of your inheritance tax estate due to your beneficial interest in the property.
Property in the second section will not form part of your taxable estate.
This article outlines which of your property will pass independently of your Will and how they will be distributed on your death.
There is some legal Will terminology mentioned in this article which will be explained throughout.
Property you own but which do not pass to your personal representatives
Your personal representatives are the people responsible for dealing with the property passing under your Will (or intestacy rules if you do not leave a valid Will).
If you appoint someone in your Will, that person is your executor and they are the personal representative for your estate.
If you do not appoint anyone, then, under the intestacy rules, a person will be appointed as your ‘administrator’, and they are the personal representative for your estate.
Property in this category may still form part of your taxable estate for inheritance tax purposes.
Jointly owned property
The important distinction here is the basis upon which you jointly own the property (whether it be land, bank and building society accounts, or joint shareholdings).
There are two types of beneficial ownership: joint tenancy and tenancy in common.
Under a joint tenancy, each owner is called a ‘joint tenant’ and each owns the whole of the asset, rather than a distinct fractional share.
The importance of the distinction is how your interest in the property passes on death.
Under a tenancy in common, your share passes to the people you choose in your Will (or, otherwise, under the intestacy rules).
However, under a joint tenancy, the asset in question does not pass to the deceased’s personal representatives as part of their estate; but, instead, their beneficial interest ceases to exist as an asset at all.
This is known as the ‘right of survivorship’ as the surviving co-owners continue to own the property together.
If there are two joint tenants and one dies, this means that the survivor becomes the sole owner.
We commonly see couples who jointly own the family home, but are not aware of the basis upon which they own it.
Sometimes they wish for their interest in the property to pass to a third party, such as a child or sibling.
If you are a joint tenant and do wish to pass your interest to a third party, we can help you.
We can help to convert your beneficial interest in the property from a joint tenancy to a tenancy in common, so it can pass to whomever you choose.
This is known as ‘severance of a joint tenancy’ and we offer this service for £20.
This is not a common occurrence today, but you may still make a statutory nomination of deposits (each up to a limit of £5,000) in friendly and industrial and provident societies.
On death, payment is made directly to the nominee, on production of a death certificate.
Such a nomination is not revoked by a Will at a later date.
If no effective nomination is made, the deposits will pass to your personal representatives and dealt with in the same way as any other asset.
This nominated property is not to be confused with pension scheme benefits, discussed below.
The Latin phrase which you may hear in this regard is ‘donatio mortis causa’, which means ‘gift because of death’.
A donatio mortis causa is a lifetime gift, but is different from other lifetime gifts in that it is made conditional on death occurring and so is complete on the donor’s death.
A donatio mortis causa is different from a gift in a Will in that the gift is effective retrospectively from the date of the gift, once the death requirement is satisfied.
On the other hand, any gifts in a Will are effective from the date of the donor’s death as a Will ‘speaks from death’.
Any land situated outside the UK is known as immovable property.
Immovable property is property that cannot be moved from one place to another and is distinguished from movable property which covers personal property, such as cars and pieces of art.
Any foreign land you own outside the UK is likely to pass in accordance with the local laws of the country in which it is based.
You can include your foreign property in your English Will; however, if your provisions conflict or are not recognised by the local laws of that country, then the latter will prevail.
As such, it is paramount that you seek legal advice from lawyers who specialise in that jurisdiction.
We work closely with lawyers who specialise in foreign jurisdictions all over the globe, so you can expect the same quality of service regarding any foreign property you own, as you can with your UK property.
You can find out more on how we can effectively cover your foreign property here.
Property you do not own but have a connection with
Property here includes property which you may appear or feel you own, but which do not actually form part of your estate because you have no beneficial interest in it.
As such, the property is not capable of passing under your Will (or intestacy rules) and do not form part of your inheritance tax estate.
Pension scheme benefits
Many occupational pension scheme benefits are drafted so that the benefits are payable at the discretion of the scheme’s trustees.
As such, unless paid to the deceased’s estate, the amount payable is not dealt with by the personal representatives, but are instead paid directly to the beneficiaries designated by the scheme (often the deceased’s immediate family members).
Pension scheme benefits are very useful in enabling payments to be made to those who may have been financially dependent on the deceased without needing to wait for a grant of representation for the personal representatives.
These benefit payments are also useful in that they are free from inheritance tax.
Members of the scheme are often asked to notify the trustees of to whom they wish the payments to be made (known as a ‘nomination of a preferred recipient’).
However, this is just a notification of wishes and is not to be confused with a statutory nomination of nominated property discussed above.
Trust or assigned life assurance policies
The person who takes out the policy has no proprietary interest in the policy, despite it being their death which triggers the payment of the policy proceeds.
The sum insured is payable directly to the named beneficiaries under the policy.
If the named beneficiary is the person’s spouse or civil partner and/or children, then a trust is automatically created in their favour.
For any other beneficiary, the policy will need to be expressly stated in trust for those persons.
If there is no such trust, or the benefit is not otherwise assigned to someone else, then it will be payable to the deceased’s estate and so potentially taxable.
Other trust interests
You may have vested interests in property under a trust.
For example, you may be a life tenant and so have a right to income or to enjoy the property for your life.
However, the trust terms will dictate what is to happen to the property on your death, and so you cannot pass your interests in your Will.
If you are a member of a class of beneficiaries under a discretionary trust, your interest is governed by the trustees’ discretion, and so there is no interest to pass in your Will.
However, it is worth noting that some interests you hold under a trust may be capable of passing in your Will.
For example, if you hold a remainder interest (i.e. once a life tenant dies, the beneficial interest in the property passes to you), it may be the case that the trust terms do not require you to outlive the life tenant.
As such, if you were to predecease the life tenant, then your remainder interest is capable of forming part of your estate and passing under your Will.
Property held in a fiduciary capacity
A fiduciary capacity is one where a person or organisation acts on behalf of another person(s), putting their interests ahead of their own, with a duty to preserve good faith and trust.
Examples include trustees of property or personal representatives.
If you are either of these, then, whilst in one sense you may own the legal title to the property, you cannot dispose of it in your Will.
There are several assets or property you may own, either solely, jointly, or for the benefit of another, which you cannot distribute in your Will.
There are separate rules which provide that they will pass independently of your Will.
This may cause some complexities where you may wish to benefit certain individuals with those assets.
In some cases, there are ways in which we can change the direction of inheritance so that you benefit those you wish.
If you would like to discuss what to include in your Will and any assets which may pass independently of your Will, then please contact Edward on 07368 526296 or firstname.lastname@example.org to get started and finished on leaving your legacy your way.
If you are interested in writing your own Will, please read our article to see what you must include in your Will.