A survey commissioned by Solicitors for the Elderly, for ‘Update Your Will Week 2023’, found only 56% of adults updated their will in the last five years – meaning roughly half of UK wills are out of date. In this blog for IFA Magazine, Iwona Durlak, Senior Partner at IMD Solicitors, reminds IFAs not only of the dangers of their clients having outdated wills but also how and when this should be done, as well as the legal issues and what can go wrong if clients fail to do so.
As the reader will know, an IFA plays an important role in planning clients’ estates, particularly for those which are more complex – i.e. with international assets. Although, the IFA will make decisions based on what’s the most financially beneficial to a client and their estate at that time, the will can go quickly out-of-date if it’s for an individual who is regularly acquiring and disposing assets. And if the will doesn’t take into account ‘new’ spouses, dependents, and friends, this will increase the likelihood of a dispute following the individual’s death.
IFAs play an important role in encouraging their clients to update their will, as well as their solicitors. Both professions can also face negligence claims from loved ones, especially if the will wasn’t updated, despite requests, before an individual passed away. An IFA, making financial decisions for a client based on an outdated will could also fall foul of the Financial Conduct Authority’s new consumer duty that will come into force this summer. So it’s important to recap on the legal issues that could arise from an outdated will, and how that could impact your role and responsibilities.
What legal issues can occur if your client’s will is outdated?
In the event of a death where there is no will or the current will stands to be out of date (a new marriage can invalidate an old will), your clients assets will be distributed according to the rules of intestacy. The statutory rules will divide their estate according to their strict rules, which states unmarried partners, close friends and distant relatives will not be permitted to inherit any assets. The estate will also pay more in inheritance tax.
Understandably, for your clients, updating their will may not seem the most appealing of tasks – it can involve reconsidering a scenario they may not wish to at the time, and making decisions that they would rather avoid. Other clients may not realise how much their life has changed since their previous version of the will was drafted, or even forget to update it.
IFAs should encourage their clients to review and update their will every 5 years, and importantly, when a major life event occurs. A will can be officially updated via a codicil, or a new will being drafted. Even if an existing will does anticipate these future events/assets acquired in the individual’s life, it will still need to be reconsidered every few years.
For example, when getting married, having children, divorcing, or when a named beneficiary or executor dies/ becomes unsuitable. Of equal importance is when the client has gained, amended or lost assets, such as businesses, property and wealth. When a will hasn’t been amended to account for any of the above scenarios, an outdated will at the minimum can cause inconvenience to loved ones, and at the worst create a space where legal disputes are likely to arise. It is worth reminding clients that The Inheritance Act 1975 allows family members, dependents, and cohabiting partners to bring claims and disputes against the deceased’s estate.
With this in mind, IFAs should ensure the reasons behind why a client’s estate is divided in a particular way are well documented. If a dispute rises in court, after their passing, this will go some way in protecting the interests of your deceased client, and mitigate the claim, providing clear documentation that each decision was logically made.
For clients who have gained / made amendments to assets in other jurisdictions, IFAs should refer their clients to IFAs and lawyers based in those regions. Depending on the country in which the assets are situated in, the ability of an English will to manage those assets can be limited. There are also different tax rules and inheritance laws that will need to be considered. For example, in France, irrespective of a will, forced heirship rules means any children are entitled to a part of the estate that is shared with a surviving spouse. This will need to be factored into any financial planning. It may be worth the client setting up another will in those jurisdictions, but obviously, these wills must all be kept updated.
You cannot completely eliminate the risk of an inheritance dispute. As readers will be aware, the wishes of a deceased client and an IFAs advice may be financially beneficial and legally watertight, but from the perspective of a family member, they could feel their provision, or lack of, is completely unfair. However, IFAs can make an impact in minimising the likelihood of financial and legal issues arising after their client has passed away, as well as protecting their professional interests.
